385.2311 
H198a 


ARGUMENT 


OF 


Burton  Hanson,  General  Solicitor,  Chicago,  Milwaukee 
AND   St.   Paul    Railway,   Before    the  Joint    Com- 
mittee ON  Railroads  of  the  Legislature  of 
Wisconsin,  on  the  Subject  of  Railway 
Regulation,  February  28,  1905. 


Agriculture,  manufactures,  commerce  and  navi- 
gation, the  four  pillars  of  our  prosperity,  are  the 
most  thriving  when  left  most  free  to  individual 
enterprise. — ^Thomas  Jefferson. 


OAK  ST.  JFiDSF 


UNIVERSITY  OF 

ILLINOIS  LIBRARY 

AT  URBANA-CHAMPAIGN 

B00K3TAC:o 


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Argument  of  Burton  Hanson,  General  ^oliciUr;  Shiczgo, 
Milwaukee  &  St.  Paul  Railway,  Before  the  Joilit  Gcrtpi- 
mittee  on  Railroads  of  the  Legislature  of  Wisconsin,  on 
the  Subject  of  Railway  Regulation,  February  28, 1905. 


^Ik.  Chairman,,  and  Gentlemen  of  the  Committee  : — 
The  subject  of  railway  rates  and  regulation  has 
been  before  the  people  of  Wisconsin  as  an  issue  in 
politics  almost  constantly  for  the  past  two  j^ears.  The 
campaign  has  been  one  of  misrepresentation.  What- 
ever opinions  have  been  formed  are  the  result  of 
political  and  partisan  discussion.  There  has  been  no 
calm  deliberation  or  intelligent  investigation  of  the  sub- 
ject. These  discussions  have  largely  grown  out  of 
misinformation  and  a  desire  to  present  the  subject 
in  a  way  that  would  prejudice  the  people  against  the 
railways  for  the  purpose  of  securing  votes.  State- 
ments that  are  untrue  in  fact  or  misleading  in  their 
effect,  when  made  by  persons  occupying  official  posi- 
tion, and  persisted  in  long  enough,  come  to  be  regarded 
as  truth,  and  often  are  used  as  the  basis  of  legisla- 
tion. 

The  people  of  this  state  have  been  misled. 

They  were  misled  by  the  statement  that  they  pay 
forty-seven  million  dollars  a  year  for  freight. 

They  were  misled  by  the  statement  that  a  railway 
commission  could  save  them  eleven  million  dollars 
annually  in  freight  rates.  The  fact  is  that  the  total 
freight   earnings    on   Wisconsin   business   has    never 


pEOiZZ- 


ve.skciicdjoiirtecn  million  dollars  a  year.  A  commis- 
sioii  thiat  v.auid  save  to  the  shippers  of  the  state  $11,- 
000,000;  of -this  $14,000,000  would  bankrupt  every  rail- 
way c6mpf!,ny  that  is  now  solvent  and  at  the  same  time 
ruin  'eyery  business  enterprise  that  is  immediately 
dependent  upon  railway  facilities  for  its  success. 

They  were  grossly  misled  by  the  statement  fre- 
quently made  to  them  that  a  railway  commission  would 
save  each  person  in  the  state  substantially  five  dollars 
a  year. 

They  were  misled  when  two  years  ago  they  were 
told  in  the  executive  message  that  the  freight  rates 
in  Wisconsin  average  from  28  per  cent,  to  40  per 
cent,  higher  than  in  Iowa. 

They  were  further  misled  in  the  executive  message 
of  this  year  when  they  were  told  that  the  excess  of 
Wisconsin  rates  over  Towa  is  from  20  to  70  per  cent., 
the  percentages  being  extended  in  both  directions, 
despite  the  fact  that  in  Wisconsin  a  general  reduction 
of  rates  was  put  in  effect  on  the  first  of  January, 
1904,  while  no  change  has  been  made  in  the  Iowa 
rates. 

They  were  again  misled  when  they  were  told  that 
their  farms  and  farm  products  were  worth  less  here 
than  the  farms  and  farm  products  of  Iowa  were 
worth  there,  and  that  this  was  so  because  the  freight 
rates  were  higher  here  than  there.  The  fact  is  the 
Federal  census  shows  that  the  farm  products  of  the 
state  of  Wisconsin  are  worth  in  the  average  13  per 
cent,  more  than  those  of  Iowa.  This  increase  in  value 
is  due  to  the  home  markets  and  local  consumption 
provided  by  the  industries  fostered  by  the  Wisconsin 
system  of  rate  adjustment. 


It  is  because  of  these  misleading  and  untruthful 
statements  made  again  and  again,  reiterated  and  per- 
sisted in  from  the  political  rostrum,  and  for  partisan 
purposes,  that  we  are  here  to-day  to  consider  meas- 
ures of  legislation  which  in  the  saner  moments  of 
Wisconsin  would  never  have  been  brought  to  our  at- 
tention. The  sober  second  thought  which  is  sure  to 
condemn  such  legislation  as  is  here  proposed,  is  bound 
to  come  as  it  did  thirty  years  ago,  when  it  demanded 
the  speedy  repeal  of  the  so-called  Potter  law. 

The  banks  as  well  as  the  large  commercial  enter- 
prises of  this  state  are  no  more  ably  and  conserva- 
tively managed  than  are  the  Wisconsin  railways.  The 
clients  of  these  banks  and  the  customers  of  these  com- 
mercial institutions  are  not  more  conservatively  or 
considerately  treated  than  are  the  shippers  and  pas- 
sengers on  the  railways,  and  yet  had  the  same  men- 
dacious campaign  been  made  against  these  banks  and 
commercial  institutions  that  has  been  made  against 
the  railways,  there  is  not  one  of  them  in  whom  the 
confidence  of  the  public  would  not  have  been  shaken. 

The  issues  have  proceeded  to  the  point  where  the 
responsibility  of  determination  is  with  you.  Your  re- 
sponsibility is  not  unlike  that  of  the  physician,  and  like 
the  physician,  the  responsibility  increases  with  the 
gravity  of  the  case.  Exactly  as  in  the  practice  of 
the  physician,  the  important  question  here  is  the  cor- 
rectness of  the  diagnosis;  that  must  precede  the  de- 
termination of  the  treatment.  It  would  not  do  for 
the  physician  to  administer  drastic  remedies  when 
there  is  no  real  disease,  nor  will  it  do  to  enact  reme- 
dial legislation  to  cure  evils  which  do  not  exist. 

I  am  here  to-day  not  so  much  to  discuss  the  merits 


4 

or  demerits  of  any  particular  measure  that  is  now 
pending  before  this  body,  as  to  attempt  to  show,  as 
was  shown  two  years  ago  to  the  satisfaction  of  the 
legislature,  that  the  transportation  business  of  this 
state  is  administered  by  the  railways  fairly,  justly 
and  equitably,  and  that  any  legislation  which  will  re- 
sult in  disturbing  the  present  adjustment  of  rates 
or  which  goes  beyond  the  prevention  of  rebates  and 
discriminations  of  all  sorts  and  kinds,  will  produce 
in  Wisconsin  the  same  industrial  losses  and  misfor- 
tunes which  like  legislation  has  brought  to  the  states 
of  Iowa  and  Texas. 

Legislation  as  far  reaching  as  that  now  proposed, 
and  which  affects  so  many  interests,  ought  to  be  based 
upon  conclusions  that  have  been  reached  not  through 
heated  or  partisan  political  discussion,  but  as  the  re- 
sult of  investigation  made  impartially  and  by  a  body 
of  men  competent  through  training  and  experience  to 
pass  intelligently  and  fairly  upon  the  questions  in- 
volved. We  may  well  profit  by  the  example  and  expe- 
rience of  Great  Britain.  Since  the  advent  of  steam 
railroads  in  that  country  in  1830,  there  have  been  many 
parliamentary  investigations  concerning  the  relation 
of  the  railroads  to  the  public  interests.  Indeed,  there 
has  scarcely  been  any  legislation  in  that  country  reg- 
ulating railways,  that  has  not  been  preceded  by  a  par- 
liamentary investigation.  To  quote  from  Joseph  Nim- 
mo,  Jr.,  an  eminent  writer  on  railway  regulation, — 

''As  the  result  of  these  elaborate  parliamentary  in- 
quiries, abuses  of  various  sorts  have  been  abated, 
mistaken  ideas  in  regard  to  the  management  and  reg- 
ulation of  the  railroads  of  Great  Britain  have  been 
corrected,  sensible  remedial  expedients  have  been 
adopted,  many  questions  at  issue  have  been  amicably 


settled,  and  public  discontent  has  been  allayed.  Thus, 
British  statesmen,  folowing  the  historic  example  of 
their  illustrious  predecessors,  have  from  time  to  time, 
in  the  language  of  Mr.  Gladstone,  'submitted  them- 
selves to  the  lessons  of  experience  and  to  the  lessons 
of  the  hour.'  " 

In  the  United  States,  with  an  area  twenty-five  times 
that  of  Great  Britain  and  Ireland,  and  with  a  railroad 
mileage  of  over  200,000  miles,  as  against  22,000  miles 
in  Great  Britain,  there  has  been  only  one  congres- 
sional investigation  of  the  railroad  question,  and  that 
was  the  senate  inquiry  of  1886,  preceding  the  passage 
of  the  Interstate  Commerce  Act.  Is  not  the  subject 
important  enough  to  require  legislative  investigation 
before  legislative  action? 

The  Tariff  Eate. 

In  the  discussion  of  railway  rates  and  regulation 
a  large  number  of  statistical  tables  have  been  pre- 
pared purporting  to  show  the  amounts  which  the  peo- 
ple pay  for  freight.  These  tables  are  in  the  main  in- 
accurate and  misleading. 

All  that  has  ever  been  presented  in  any  of  these 
comparisons  is  the  tariff  rate.  This  has  been  used 
without  consideration  of  the  traffic  which  is  moved 
under  it  and  without  reference  to  whether  it  was  a 
rate  under  which  traffic  is  actually  moved  at  all.  From 
these  tariff  rates  thus  used,  averages  have  been  com- 
puted and  percentages  deduced  from  the  averages. 

Of  and  by  itself,  the  tariff  rate  proves  nothing.  The 
average  rate  on  grain  in  Wisconsin  is  eight  cents  per 
hundred  pounds,  and  the  average  tariif  rate  on  logs 
is  tivo  cents  per  hundred  pounds.    On  the  comparison 


6 

of  these  rates,  it  would  appear  that  the  rate  on  grain 
is  four  times  the  rate  on  logs,  but  eight  cents  carries 
the  grain  150  miles,  while  two  cents  carries  the  logs 
50  miles;  therefore  the  rate  on  grain  is  1.07  cent  per 
ton  per  mile  and  on  logs  .8  of  a  cent  per  ton  per  mile, 
the  rate  on  grain  being  one-third  more  than  that  on 
logs  and  not  four  times  as  w,uch.  To  a  large  extent 
such  error  as  this  runs  through  all  the  tabulations  and 
comparisons  that  have  been  made. 

Eates  That  Do  Not  Cakry  the  Traffic. 

The  people  of  "Wisconsin  have  been  seriously  mis- 
led in  their  consideration  of  the  transportation  ques- 
tion by  the  frequent  comparison  of  rates  under  which 
no  traffic  is  moved.  At  Rhinelander,  during  one  of 
the  political  campaigns  upon  this  subject,  a  very 
plausible  argument  was  ]:)vesented,  showing  that  the 
value  of  farming  land  in  Oneida  County  is  depre- 
ciated $6.16  per  acre  in  value  because  the  freight  rate 
on  oats  from  there  to  Milwaukee  is  1.09  cent  per  bushel 
higher  than  the  rate  for  a  like  distance  in  Iowa.  This 
is  a  very  taking  argument,  especially  among  those 
whose  delight  is  in  any  statement  ''against  the  rail- 
roads." But  the  fact  is  that  it  would  not  make  any 
difference  in  the  shipment  of  oats  from  Rhinelander 
if  the  rate  were  $5  a  bushel,  and  it  would  be  of  no 
benefit  to  the  farmers  of  Iowa  if  the  rate  for  the  same 
distance  within  the  state  of  Iowa  were  $5  a  car.  No 
oats  are  shipped  from  Rhinelander  to  Milwaukee  or 
anywhere  else.  Oats  are  shipped  into  Rhinelander 
and  the  market  price  at  Rhinelander  is  the  value  of 
the  oats  at  Milwaukee  with  the  freight  from  Mil- 
waukee to  Rhinelander  added.     The  Oneida  County 


farmer  can  get  the  same  price  for  his  oats  at  Rhine- 
lander  that  it  would  cost  to  buy  the  oats  at  Milwau- 
kee and  ship  them  there,  so  that  in  his  case  the  higher 
the  freight,  the  better  his  price.  He  gets  the  benefit 
of  the  freight,  and  the  greater  it  is,  the  larger  his 
benefit.  Therefore,  the  excess  of  1.09  cent  per  bushel, ' 
if  it  had  any  such  force  at  all,  would  increase  the 
value  of  his  land  $6.16  per  acre  instead  of  decreasing 
it.  In  Iowa  it  makes  no  difference  what  the  rate  of 
oats  may  be  between  two  points  within  the  state.  No 
oats  are  shipped  between  points  in  Iowa.  Oats  grow 
everywhere  in  that  state  and  everyone  there  has  what 
he  needs.  They  have  no  occasion  to  buy  them  or 
ship  them  in.  Iowa  oats  are  shipped  to  Chicago  and 
eastern  points.  Therefore,  it  is  of  no  avail  to  com- 
pare the  rate  on  oats  from  Rhinelander  to  Milwaukee 
with  the  rate  for  a  like  distance  in  Iowa,  and  any  re- 
sult deduced  from  such  a  comparison  is  unfair  and 
misleading. 

It  needs  the  exercise  of  no  imagination  to  see  the 
effect  which  such  an  argument  as  this  would  have  upon 
the  voters  of  that  community,  coming  as  it  did  from  the 
chief  executive  of  the  state.  It  could  not  fail  to  have 
great  weight  with  them.  It  cannot  be  denied  that  it 
was  a  material  factor  in  influencing  the  determination 
of  their  votes.  Such  misrepresentation  as  this  was 
made  throughout  the  state  and  throughout  the  entire 
campaign  on  this  question.  The  sentiment  that  is  back 
of  this  legislation  rests  upon  this  misleading  of  public 
opinion.  Without  it,  these  bills  would  not  be  here  to- 
day for  us  to  consider. 


8 

Rates  to  and  From  the  Market. 

Perhaps  the  most  important  source  of  serious  mis- 
representation in  the  presentation  of  the  railway  rate 
question  in  Wisconsin  has  been  the  selection  for  com- 
parison, of  rates  in  Wisconsin  which  carry  the  product 
to  market  or  bring  goods  from  the  market,  with  rates 
in  Iowa  which  do  not  reach  the  market  in  either  direc- 
tion. It  has  been  practically  a  universal  comparison 
of  market  rates  with  paper  rates.  It  does  not  make 
any  difference  to  the  shipper  what  the  rate  is  on  com- 
modities he  does  not  ship  and  it  makes  equally  no  dif- 
ference to  him  what  the  rate  is  between  two  points  to 
or  from  which  he  does  not  ship,  ^^^lat  concerns  the 
shipper  of  Wisconsin  in  comparing  rates  with  Iowa, 
is  whether  the  Iowa  shipper  can  get  his  commodity 
to  or  from  the  market  for  less  money;  and  in  the 
overwhelming  preponderance  of  comparisons  that  have 
been  made  between  Wisconsin  and  Iowa,  where  in  both 
cases  compared,  the  rates  reach  the  market,  Wiscon- 
sin rates  are  lower  mile  for  mile.  The  fact  that  rates 
are  lower  for  the  same  number  of  miles  in  Iowa, 
where  nothing  can  be  shipped,  and  where  in  fact, 
nothing  compared  is  ever  shipped,  is  neither  a  bene- 
fit to  Iowa  nor  disadvantage  to  Wisconsin. 

Average  Rate. 

Another  important  particular  in  which  the  argu- 
ments made  to  sustain  the  railway  regulation  agita- 
tion have  been  erroneous  and  misleading  is  the  frequent 
use  of  the  term  "average  rate,"  which  as  it  has  been 
used  is  in  fact  neither  an  average  nor  a  rate.  The 
only  way  in  which  an  average  rate  could  be  made 
to  mean  anything  would  be  arrived  at  by  the  averag- 


9 

ing  of  rates  on  whicli  an  exactly  equal  amount  of  each 
commodity  averaged  liad  been  moved.  The  worth- 
lessness  of  such  computations,  as  well  as  their  posi- 
tively misleading  character,  is  shown  by  the  following 
series  of  computations:  First,  we  will  take  the  rates 
in  Iowa  and  Wisconsin  on  four  commodities  for  the 
same  distance: 

COMMODITY  IOWA  WISCONSIN 

Grain 8.24  8.50 

Hay    6.17  7.50 

Lumber   6.41  7.00 

Soft  Coal 5.07  3.75 

25.89  26.75 

Average  rate 6.47  6.69 

Wisconsin  .03  per  cent  higher  than  Iowa. 

The  rate  per  ton  mile  for  each  commodity  in  both 
states,  is  as  follows: 

COMMODITY  IOWA  WISCONSIN 

Grain 1.20  1.07 

Hay    1.00  1.33 

Lumber   .85  .67 

Soft  Coal 77  .80 

3.82  3.87 

Average   .95  .97 

Wisconsin  .03  per  cent,  higher  than  Iowa. 

But,  the  fact  is  that  in  Iowa  these  four  commodities 
amount  to  55.34  per  cent,  of  the  traffic,  and  are  car- 
ried at  a  net  amount  16.69  per  cent,  below  the  average 
of  revenue,  while  the  same  commodities  in  Wisconsin 
amount  to  43.92  per  cent,  of  the  traffic  and  are  car- 
ried at  a  net  amount  17.32  per  cent,  below  the  average 
of  revenue.  Therefore  the  net  traffic  result,  when  the 
business  is  applied  to  the  rates,  is  that  on  these  four 


10 

commodities  Wisconsin  pays  .63  per  cent,  less  than 
Iowa,  in  spite  of  tlie  average  rates  that  are,  on  the 
face  of  them,  higher.  These  are  as  plausible  compari- 
sons as  any  which  have  been  made,  they  are  as  accu- 
rate as  anv  that  have  been  made  and  are  as  mislead- 
ing  as  any  that  have  been  made.  They  have  all  of  the 
characteristics  of  the  comparisons  which  have  been 
presented  to  the  people  for  the  formation  of  their 
opinion  upon  this  important  question  and  yet,  when 
analyzed,  they  show  the  exact  opposite  of  the  facts. 

Conclusions  based  upon  such  premises  as  these 
cannot  fail  to  be  as  erroneous  as  the  basis  of  them  is 
false,  and  yet  it  is  upon  these  arguments  that  the 
opinions  of  the  people  of  the  state  of  Wisconsin,  con- 
cerning the  regulation  of  railroad  rates  have  been 
built.  They  have  been  led  to  believe  that  the  rates 
of  Wisconsin  are  higher  than  those  of  Iowa,  and  that 
the  farmer  of  Iowa  gets  his  product  to  market  for 
less  money  than  the  farmer  of  Wisconsin;  that  the 
merchant  of  Iowa  gets  his  goods  from  the  market  for 
less  money  than  the  merchant  of  Wisconsin.  This  con- 
viction has  been  forced  upon  them  by  the  comparison 
of  elements  which  are  not  related  to  each  other,  and 
between  which  no  comparison  is  possible  that  will  pro- 
duce an  intelligible  result.  The  rates  of  freight  do 
not  represent  what  the  people  pay,  nor  do  the  miles 
on  the  schedules  of  the  railroads  represent  the  haul 
of  their  tonnage.  A  rate  does  not  become  a  factor 
in  traffic  until  it  is  applied  to  a  commodity  shipped, 
and  a  given  number  of  miles  has  no  relation  to  the 
freight  service  of  a  state  until  a  commodity  is  moved 
that  distance.  The  determAning  factor  in  any  consid- 
eration of  transportation,  and  the  only  factor  %ipon 


11 

ivhich  the  cost  of  the  service  can  be  ascertained  is  the 
application  of  the  traffic  moved  to  the  rate  and  the 
distance. 

Not  until  the  traffic  of  the  states  of  Iowa  and  Wis- 
consin is  analyzed  and  the  rates  under  which  it  is 
moved  are  applied  to  the  commodities  actually  trans- 
ported, can  a  result  be  reached  upon  which  to  base  an 
intelligent  opinion.  The  campaign  for  railway  regu- 
lation has  been  carried  forward  wholly  upon  the  paper 
basis  of  rates  and  distance,  with  no  reference  to  the 
actual  results  arrived  at  from  the  traffic.  "We  are 
now  confronted  with  bills  which  have  been  presented 
to  the  legislature  for  the  purpose  of  correcting  the 
evils  of  •  a  situation  which  is  claimed  to  exist,  the  ex- 
istence of  which  is  dependent  for  proof  upon  the  argu- 
ments that  have  been  based  on  such  foundation  as 
this.  If  the  condition  does  not  exist  and  if  the  peo- 
ple have  been  led  into  the  belief  of  substantially  the 
exact  opposite  from  the  real  truth,  it  would  seem  to 
follow  that  a  large  measure  of  the  reason  for  the  pas- 
sage of  such  a  law  is  thereby  removed. 

Reduced  to  a  general  statement,  the  claims  for  the 
passage  of  these  bills  may  be  said  to  rest  upon  the  con- 
tention that  the  rates  charged  for  freight  in  Wiscon- 
sin are  too  high  and  that  they  are  inequitably  dis- 
tributed; the"  specification  of  the  general  charge  resting 
upon  comparisons  with  assumed  conditions  in  the 
state  of  Iowa. 


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14 


The  Basis  of  the  Tables. 

The  basis  of  the  tables  presented  herewith  is  the 
percentage  of  each  class  of  commodity  carried  in  both 
Iowa  and  Wisconsin  as  sho'^>ni  by  the  reports  of  the 
railroad  commission  of  each  state  for  the  year  1902. 
This  is  the  latest  year  for  which  complete  reports  are 
published  in  both  states,  and  in  a  volume  of  traffic  as 
large  as  that  which  is  treated  here,  the  difference  in 
the  proportion  of  each  commodity  carried  will  not  be 
material  as  between  different  years.  It  should  be  borne 
in  mind  that  the  object  of  these  tables  is  to  establish 
the  relation  of  rates  to  other  rates  in  showing  which 
the  proportion  of  the  whole  traffic,  rather  than  the  ac- 
tual volume  of  the  traffic,  is  the  important  factor. 

The  Eate  per   Toit   Mile. 

It  is  practically  an  impossibility  to  arrive  at  the 
exact  and  actual  rate  per  ton  mile  at  which  each  com- 
modity is  carried  in  the  business  treated  in  these 
tables.  To  do  this  would  require  the  compilation  of 
every  waybill  on  every  individual  shipment  in  both 
states  for  the  entire  year,  a  task  which  is  manifestly 
out  of  all  proportion  to  the  value  of  the  result  thus 
attained.  It  is  not  intended  to  represent  that  the 
rate  per  ton  mile  for  each  commodity  as  given  in  these 
tables  is  the  exact  rate  per  ton  mile  which  the  traffic 
in  each  instance  bears,  but  it  is  approximately  so,  and 
for  the  purpose  of  comparison  they  are  relatively  ac- 
curate. They  are  arrived  at  by  taking  the  best  judg- 
ment of  a  number  of  traffic  officials  familiar  with  the 
business  of  both  states  as  to  the  average  haul  on  each 
of  the  different  commodities,  which  will  carry  them 


15 

to  and  from  the  market,  and  the  average  rate  which 
will  carry  the  commodity  for  that  haul.  The  accuracy 
of  the  judgment  of  these  gentlemen  is  amply  at- 
tested by  the  fact  that  the  net  result  arrived  at  from 
their  estimates  is  substantially  the  same  as  a  compu- 
tation of  the  rate  per  ton  mile  shown  by  dividing  the 
total  freight  receipts  of  each  state  by  the  total  ton 
mileage. 


'o^ 


Modification  of  Eate  by  Teaffic. 

It  has  long  been  recognized  by  traffic  officials  that 
the  revenue  from  freight  is  beyond  their  control.  It 
has  long  been  established  that  the  traffic  will  not  pro- 
duce in  the  aggregate  the  result  called  for  by  the 
tariffs.  This  is  shown  very  conclusively  by  these  tables, 
in  which  the  amount  of  modification  of  the  net  rate 
per  ton  mile  resulting  from  the  character  of  the  traf- 
fic carried  is  presented.  The  average  rate  called  for 
by  the  separate  rates  per  ton  mile  in  the  Wisconsin 
table  is  1.39  cent,  and  if  an  equal  amount  of  traffic 
Were  carried  under  each  of  the  rates,  the  net  rate 
per  ton  mile  on  the  business  carried  would  be  1.39 
cent.  But  we  find  that  7.61  per  cent,  of  the  business 
is  merchandise  carried  at  115.83  per  cent  above  the 
average  rate.  So  that  the  net  result  is  increased 
7.61  per  cent,  of  115.83  per  cent,  or  8.81  per  cent. 
On  the  other  hand,  we  find  that  19.53  per  cent,  is 
lumber,  which  is  carried  at  51.80  per  cent,  below  the 
average  rate,  which  results  in  a  decrease  of  the  aver- 
age amounting  to  10.12  per  cent.  Carrying  these  fig- 
ures out,  we  find  that  in  Wisconsin  79.37  per  cent, 
of  the  traffic  results  in  a  decrease  of  the  average  rate 


16 

of  31.08  per  cent.,  while  20.63  per  cent,  of  the  traffic 
results  in  an  increase  of  12.58  per  cent.  This  makes 
a  net  reduction  of  18.49  per  cent,  in  the  rate  per  ton 
mile,  which  amounts  to  .26  of  a  cent  and  reduces  the 
rate  per  ton  mile  from  1.39  to  1.13.  In  Iowa  we  find 
that  the  average  rate  per  ton  mile  as  shown  by  the 
estimated  rates  per  ton  mile  is  1.41  cent,  and  that 
78.35  per  cent,  of  the  traffic  decreases  the  rate  20.28 
per  cent.,  while  21.65  per  cent,  of  the  traffic  increases 
the  rate  10.36  per  cent.,  making  a  net  decrease  of  9.92 
per  cent.,  which  reduces  the  rate  of  1.41  cent  to  1.27 
cent.  This  shows  that  the  net  rate  per  ton  mile  in 
Iowa  for  that  year  was  12.3  per  cent,  higher  than  Wis- 
consin, which  is  in  some  measure  accounted  for  by 
the  fact  that  24.5  per  cent,  of  the  Iowa  traffic  is  grain, 
which  is  carried  at  12.15  per  cent,  higher  than  Wis- 
consin. The  rate  is  not  only  that  much  higher  than 
Wisconsin,  but  the  volume  is  almost  twice  as  much. 
These  two  elements  go  a  long  way  toward  accounting 
for  the  difference  in  net  rate  per  ton  mile.  The  fact 
is,  that  taking  the  different  character  of  the  traffic 
displayed  into  account,  the  adjustment  of  rates  as 
between  Iowa  and  Wisconsin  is  remarkably  just  and 
equitable. 


17 


Diagrams  of  Traffic. 


w 


18 


PROPORTIONAL  VOLUME  or  various  COM  MODITI  E5  mWISCONSIN  TRAf  flC 


e.e* 


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19 


PROPORTIONAL  VOLUME  OFVARI0U5  COMMODITIES  mlOWA   TRAmC. 


STOnc  .  Sa.no  etc. 
3.19 


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HAY 
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HARD    COAL 
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L  UM  B  ER      8.03 


LIVE     STOCK  9.68 


SOFT     COAL       21.63 


GRAIN     24.55 


20 


The  diagrams  are  prepared  to  scale  for  the  purpose 
of  exhibiting  the  proportional  relations  of  the  differ- 
ent lines  of  data  contained  in  the  tables. 

Proportionax,  Volume  of  Traffic. 

These  diagrams  both  for  Wisconsin  and  Iowa  show 
the  proportional  amount  of  each  class  of  commodity 
handled,  and  it  is  to  be  noted  that  the  Wisconsin  dia- 
gram shows  a  rather  more  even  distribution  of  com- 
modity, and  a  slightly  reduced  tendency  to  concentra- 
tion within  a  few  lines.  To  a  large  extent  this  is 
governed  by  the  difference  in  the  character  of  the  two 
states.  Iowa  is  an  essentially  agricultural  state,  the 
great  bulk  of  her  traffic  being  limited  to  grain,  soft 
coal  and  live  stock,  together  with  lumber,  which  forms 
a  staple  bulk  in  the  traffic  of  all  states.  Wisconsin, 
on  the  other  hand,  shows  an  increase  over  Iowa  in 
flour,  which  is  an  industry  fostered  by  the  milling-in- 
transit  rate,  and  also  in  hard  coal  in  which  the  traffic 
is  stimulated  by  the  commodity  tariffs.  In  the  area 
in  which  Iowa  shows  four  commodities  AVisconsin 
shows  eight,  which  represents  in  a  general  way  the 
diver sitv  of  interest  in  Wisconsin,  and  the  concentra- 
tion  of  business  in  Iowa.  This  difference  is  largely 
due  to  the  adjustment  of  railway  rates  to  the  needs 
of  business,  rather  than  determined  by  the  ar- 
bitrary rule  of  distance.  The  one  meets  the  necessi- 
ties of  commerce,  while  the  other  forces  commerce 
within  its  limitations. 


21 


The  Relative  Eate  per  Tox  Mile  in  Iowa  axd 

Wisconsin. 

The  diagram  showing  the  relative  rate  per  ton  mile 
in  Iowa  and  Wisconsin,  is  a  complete  exposition  of 
the  fact  that  as  between  the  two  states,  the  rates  are, 
generally  speaking,  not  dissimilar.  Especial  atten- 
tion on  this  diagram  is  called  to  the  figures  indicat- 
ing the  amount  of  traffic  moved  on  the  different  rates. 
In  all  considerations  of  transportation  matters,  this 
is  the  important  factor.  For  instance,  Wisconsin 
shows  a  rate  of  four  cents  per  ton  mile  on  poultry, 
while  only  .28  of  one  per  cent,  is  moved  under  this 
rate.  On  the  other  hand,  Wisconsin  shows  a  rate  of 
.67  of  a  cent  per  ton  mile  on  lumber  on  which  practi- 
cally one-fifth  of  the  entire  traffic  of  the  state  is  moved. 
On  the  basis  on  which  all  rate  comparisons  have  here- 
tofore been  made,  the  rate  on  the  poultry  would  stand 
as  an  equal  factor  with  the  rate  on  the  lumber.  But 
when  the  amount  of  traffic  moved  under  the  two  rates 
is  considered,  the  exceedingly  high  rate  on  the  poul- 
try becomes  of  infinitesimal  consideration  in  the  reg- 
ulation of  transportation.  There  is  another  element 
to  be  considered,  and  that  is  the  value  of  the  commodi- 
ties transported.  The  exceedingly  high  rate  on  poul- 
try puts  the  dressed  poultry  down  in  the  market  at  a 
-tax  of  not  exceeding  2^  per  cent,  of  its  value,  while 
the  exceedingly  low  rate  on  lumber,  taxes  that  com- 
modity 15  per  cent,  for  delivery.  Certainly,  the  poul- 
try raiser  could  hardly  expect  to  get  his  product  to 
market  for  less  than  2^  per  cent.,  and  no  one  could  in 
fairness  ask  the  lumberman  to  pay  more  than  15  per 
cent,  for  the  market  of  his  product.  Similar  com- 
parisons to  this  run  all  through  this  diagram.     It  not 


22 

only  shows  the  justness  of  the  "Wisconsin  rates,  but  the 
more  thoroughly  it  is  studied,  the  more  strongly  will 
it  demonstrate  that  rate  making  is  not  only  technical 
and  scientific  in  the  abstract,  but  that  there  is  much 
of  scientific  application  and  much  more  of  justice  in 
the  adjustment  of  those  rates. 

The  Eelation  of  Rate  to  Traffic. 

These  diagrams  for  both  Iowa  and  Wisconsin  show 
the  relation  of  rate  and  traffic,  and  illustrate  the  fact 
that  the  large  volume  of  traffic  moves  on  the  low  rate 
and  that  the  high  rates  carry  the  small  volume. 


23 


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28 

Taking  the  rates  of  the  state  in  comparison  with  each 
other,  we  find  that  79.37  per  cent,  is  carried  below  the 
average  ton  mile  tariff  rate  for  the  state,  and  20.63  per 
cent,  above  the  average.  When  the  average  rate  is 
applied  to  the  volume  of  traffic,  the  net  revenue  of  the 
carriers  is  increased  12.58  per  cent,  by  the  amount  that 
is  carried  above  the  average  rate,  and  the  amount  which 
is  carried  below  the  average  decreases  the  net  revenue 
31.08  per  cent.,  making  the  final  result  of  the  applica- 
tion of  the  traffic  to  the  rate  a  net  reduction  of  18.49 
per  cent.  It  is  this  fundamental  element  of  the  rate 
question  which  has  never  been  considered  in  all  the 
arguments  upon  which  the  people  of  Wisconsin  have 
been  asked  to  base  their  judgment. 

The  utter  futility  of  comparing  tariff  rates  is  illus- 
trated by  the  analysis  of  traffic  presented  herewith. 
The  traffic  rate  per  ton  mile  on  poultry  is  187.77  per 
cent,  higher  than  the  average  rate.  On  the  face  of  it, 
presented  to  the  poultry  raisers  of  Wisconsin,  this 
statement  could  not  fail  to  create  the  impression  that 
they  were  unfairly  dealt  with,  and  as  it  has  been  so 
frequently  put  to  them,  ''robbed."  The  fact  is  that 
the  traffic  in  this  commodity  amounts  to  .28  of  one  per 
cent,  of  the  total  traffic,  and  the  total  amount  of  freight 
paid  under  this  rate  for  1902  was  $260,167.56,  of  which 
the  amount  added  by  the  excess  over  the  average  is 
$169,759.40.  On  the  other  hand  the  grain  of  the  state 
which  amounts  to  13.38  per  cent,  of  the  traffic,  is  car- 
ried at  23.2  per  cent,  below  the  average  tariff  rate 
per  ton  mile  on  which  the  total  freight  paid  is  $3,- 
325,704.25,  the  reduction  by  the  variation  from  aver- 
age amounting  to  $994,514.31,  or  almost  a  million 
dollars  a  year.    While  the  effect  of  the  increase  froim 


29 

average  on  poultry  would  have  been  vigorously  called 
to  the  attention  of  the  farmers  of  Wisconsin,  nothing 
has  ever  been  said  to  them  about  the  decrease  from 
average  on  grain.  The  fact  is  that  there  is  no  basis 
except  that  of  the  relation  of  freight  to  the  value  of 
the  commodity  transported,  on  which  the  relative 
rates  of  different  commodities  can  be  compared.  The 
rate  on  poultry  is  4  cents  per  ton  mile  and  the  rate 
on  grain  is  1.07  cent  per  ton  mile.  Both  these  figures 
are  absolute  and  not  in  any  way  relative;  there  is 
no  way  in  which  they  can  be  made  so.  The  only  ques- 
tion to  be  determined  is  whether  4  cents  is  a  fair  rate 
on  poultry  and  whether  1.07  cent  is  a  fair  rate  on 
grain.  The  rate  on  poultrj^  lays  the  product  down  at 
the  market  for  2.5  per  cent,  of  its  value,  and  the  rate 
on  grain  lays  that  down  in  the  market  for  about  12 
per  cent,  of  its  value.  This  reduces  the  transporta- 
tion of  the  two  conmiodities  to  a  basis  on  which  the 
relative  rates  can  be  compared,  and  there  is  no  other 
basis  on  which  any  relation  between  the  rates  on  dif- 
ferent commodities  can  be  shown.  From  this  com- 
parison it  appears  that  the  rate  which  is  187.77  per 
cent,  higher  than  the  average  rate  is  actually  lower 
than  the  rate  which  is  23.2  per  cent,  below  the  aver- 
age, so  far  as  results  are  concerned.  This  is  a  basis 
to  which  no  rate  comparison  out  of  all  the  thousands 
that  have  been  made,  has  never  been  reduced. 

Revenue  Determined  by  Traffic,  Not  Rate. 

It  should  be  understood  that  in  all  the  discussion  of 
the  analysis  of  traffic  presented  herewith,  the  term 
average  rate  is  used  merely  as  an  arbitrary  point  of 
computation.    The  fact  that  a  rate  is  above  or  below 


30 

this  arbitrary  point  has  no  bearing  whatever  of  itself 
on  the  question  as  to  whether  the  rate  is  high  or  low. 
The  actual  amount  received  for  transportation  de- 
pends as  much  on  the  character  and  amount  of  the 
tonnage  as  it  does  on  the  rate.  It  is  therefore  neces- 
sary to  arrive  at  a  point  at  which  the  rate  would  be 
fixed,  if  an  equal  amount  of  tonnage  were  moved  at 
each  of  the  different  rates,  in  order  to  compute  the 
amount  which  a  variation  in  amounts  of  tonnage  at 
varying  rates  affects  the  result.  This  is  important 
as  showing  that  the  regulation  of  tariff  rates  either 
by  the  carriers  or  by  a  commission,  will  not  determine 
the  revenue  to  be  derived  from  the  traffic.  A  decrease 
of  the  proportion  of  a  commodity  carried  at  below  the 
average  of  the  tariff  rates  will  reduce  the  revenue 
without  any  modification  of  rate,  while  an  increase  of 
any  commodity  carried  above  the  rate  will  increase 
it.  The  tariff  rates  are  merely  the  measure  with  which 
the  traffic  is  reduced  to  revenue.  The  amount  of  the 
revenue  is  determined  by  the  volume  of  commodities 
measured  after  the  measure  has  been  fixed.  For  in- 
stance, if  it  is  proposed  to  reduce  the  revenue  of  the 
carriers,  it  is  a  practical  impossibility  to  determine  in 
advance  what  result  a  given  reduction  in  rates  would 
produce. 

Let  us  suppose,  for  illustration,  that  it  is  determined 
to  reduce  the  revenue  10  per  cent.  On  the  theory  on 
which  railway  rates  have  heretofore  been  discussed, 
this  could  be  arrived  at  by  making  a  general  or  hori- 
zontal reduction  of  10  per  cent,  in  the  tariff  rates. 
This  would  reduce  the  average  of  the  tariff  rate  per 
ton  mile  as  shown  on  the  accompanying  analysis  of 
Wisconsin  traffi-c  from  1.39  cent  to  1.25  cent.  The  tariff* 


31 

rate  is  modified  18.49  per  cent,  by  the  cliaracter  of  the 
traffic  which  in  the  case  of  the  present  average  re- 
duces it  to  1.13  and  after  the  10  per  cent,  reduction 
would  reduce  it  to  1.02.  This  would  be  a  net  reduc- 
tion of  .23  of  a  cent  instead  of  .26  of  a  cent.,  or  a  result 
20  per  cent,  in  error.  But  even  if  the  reduction  were 
made  by  a  percentage  that  would  reduce  the  net  result 
10  per  cent.,  the  only  thing  that  would  actually  produce 
that  effect  in  the  end  would  be  the  exact  maintenance 
of  the  proportions  of  traffic  between  the  different  com- 
modities, as  it  existed  at  the  time  of  the  reduction. 

The  Adjustmei^t  op  Rates. 

The  adjustment  of  rates  as  between  each  other,  as 
shown  by  these  tables  and  diagrams,  is  very  interesting 
and  instructive.  This  is  especially  so,  as  there  is  no 
basis  known  to  the  transportation  expert,  on  which 
a  given  rate  for  a  given  commodity  can  be  arbitrarily 
arrived  at.  The  traffic  official  cannot  fall  back  on  the 
simple  computation  of  cost,  as  the  merchant  can,  in 
arriving  at  his  charge.  The  elements  of  cost  which 
enter  into  transportation  are  entirely  beyond  human 
knowledge  in  advance  of  the  performance  of  the  ser 
vice,  and  are  only  subject  to  general  estimate,  as  re- 
lated to  any  particular  item  transported,  after  the 
service  is  performed.  The  element  of  cost  in  trans- 
portation is  a  very  elusive  factor.  The  only  method 
known  to  the  traffic  official,  is  to  find  tlie  rate  that  will 
move  the  traffic.  In  the  very  nature  of  this  process,  it 
is  no  rule  at  all.  It  is  for  this  reason  that  wherever 
the  regulation  of  railway  rates  by  arbitrary  limitations 
or  by  inexperienced  effort  has  been  attempted,  it  has 
resulted  in  disaster  to  the  carriers,  and  misfortune  to 


32 

the  shippers.  In  Texas,  where  rates  are  made  by  a 
state  commission,  the  business  of  the  state  has  been 
concentrated  at  the  points  favored  by  the  discrimi- 
nations of  the  conmiission,  and  within  the  lines  aided 
by  their  inexpert  and  experimental  rate-fixing.  In 
Iowa  the  inelastic  nature  of  the  tariff  based  only  on 
distance  has  driven  practically  everything  except  agri- 
cultural and  mercantile  business  out  of  the  state.  The 
result  of  removing  from  commerce  the  benefits  of  prop- 
erly adjusting  its  transportation  rates  is  strikingly 
shown  by  the  effect  upon  the  business  of  Iowa.  In 
1902  the  strictly  local  business  of  the  Chicago,  Mil- 
waukee &  St.  Paul  Eailway  in  Iowa  was  18.6  per  cent, 
of  its  total  business  in  that  state,  while  in  Wisconsin 
the  local  business  was  29.2  per  cent.,  the  fostering  of 
local  business  by  the  adjustment  of  rates  giving  the 
people  of  Wisconsin  59  per  cent,  more  of  their  own 
business  than  the  people  of  Iowa  could  secure  under  the 
inelastic  rates  provided  by  a  distance  tariff  under 
maximum  limits.  This  explains,  to  a  degree  at  least, 
the  following  editorial  which  appeared  in  the  Des 
Moines  Daily  Capital,  February  4,  1902: 

The  people  of  Iowa  realize  that  they  have  a  great 
state  and  they  are  proud  of  it,  but  they  are  asking 
themselves  why  mannufacturing  industries,  according 
to  the  census  of  1900,  increased  in  a  greater  propor- 
tion in  Wisconsin,  Illinois  and  Missouri  than  in  good 
old  Iowa.  Iowa  has  great  coal  fields — in  fact  is  the 
sixth  state  in  the  union  in  the  production  of  bituminous 
coal.  In  some  parts  of  the  state  oak  and  hickory  wood 
suitable  for  wagon  timber  abound.  In  all  parts  corn 
and  potatoes  are  produced,  and  corn  and  potatoes  make 
starch.  In  all  parts  of  the  state  sweet  corn,  tomatoes, 
peas,  beans,  pumpkins,  squashes,  and  everything  go- 
ing to  make  up  canned  goods  are  grown  in  abundance. 

The  soil  is  especially  adapted  to  growing  oats  for 
oatmeal;  likewise  it  will  produce  broom  corn  of  the 


33 

best  quality.  Milk  is  already  a  groat  ;pro<^y v)t ,  ^nd 
there  is  room  for  condensed  milk  factories.  Hogs  and 
cattle  are  the  well  known  staples,  bii^  ^'aciking  houses 
are  few ;  in  fact,  fewer  than  they  wer6  ten  "years  ago> 
With  all  these  raw  materials  at  hanci.  .^ky  has  iowft 
not  grown  in  manufacturing  mdustr les L  Xlie.Qapital 
is  free  to  say  that  we  believe  the  fault  is  with  the 
Iowa  railroad  law  and  its  ironbound  conditions.  There 
has  been  no  reduction  of  interstate  rates  to  and  from 
Iowa  points  in  twelve  years,  not  since  the  present 
Iowa  railroad  law  was  enacted. 

Not  a  single  new  industry  has  been  built  up  in  Iowa 
on  account  of  the  present  law.  No  one  industry  has 
been  especially  favored  and  developed,  excepting  the 
wholesale  grocery  trade,  which  appears  to  have  espe- 
cially flourished.  What  is  to  be  done  under  these  cir- 
cumstances? What  can  be  done  for  the  upbuilding  of 
Iowa  industries,  Iowa  factories,  and  Iowa  packing 
houses  ?  There  must  be  some  loosening  up  of  railroad 
matters  to  allow  factories  and  packing  houses  to  be 
taken  care  of.  There  will  be  no  particular  develop- 
ment under  present  conditions.  Numerous  packing 
houses  and  other  industrial  establishments  are  stand- 
ing idle  in  various  parts  of  the  state.  Others  have  been 
removed  to  Illinois  and  other  neighboring  states. 

They  have  not  gone  to  Chicago.  They  have  not  been 
swallowed  up  by  the  great  cities.  They  have  gone  to 
towns  in  Illinois  and  other  states  no  larger  than  those 
they  left  behind.  What  committee  of  the  legislature 
will  have  the  foresight  to  take  up  and  deal  with  this 
problem  honestly  and  conscientiously?  The  prosper- 
ity of  the  Iowa  farm  depends  much  upon  the  prosperity 
of  the  Iowa  factory.  These  are  pressing  problems  that 
ought  to  be  considered  by  the  proper  committees  of 
the  present  general  assembly. 

To  this  astonishing  exposition  of  the  industrial  con- 
dition of  Iowa,  might  well  have  been  added  a  reference 
to  the  fact  that  with  all  the  live  stock  which  is  raised 
there,  not  a  hide  is  tanned  in  the  entire  state,  while 
Wisconsin,  with  very  little  live  stock  produced,  has 
large  and  growing  tanning  industries. 


34 

The'  United  States  census  shows  that  between  1890 
ahd  -IGOO  the-  fti^'nirfacturing  establishments  of  the 
StaiiecFf  Texcts- increased  in  number  3,290,  or  131  per 
'^eiit;  But  ^  when  -this  increase  is  examined  it  shows 
that  tild  regnlaf ion  of  railway  rates  has  not  only  not 
de\''eloped  manufacturing  in  Texas,  but  has  had  quite 
the  contrary  effect.  Of  the  increase  of  3,290  ''manu- 
facturing" establishments,  we  find  upon  consulting  the 
details  that  2,650  were  cotton  gins,  90  were  cotton  seed 
oil  and  cake  mills  and  325  newspaper  and  printing 
plants,  none  of  which  "manufacture"  anything;  184 
were  "saddlerv"  establishments,  which  includes  har- 
ness  shops  and  repair  shops,  and  323  were  lumber  mills 
which  are  located  there  because  the  timber  is  there, 
and  not  because  the  rates  are  favorable.  As  these 
five  items  alone  amount  to  282  more  than  the  total  in- 
crease, it  is  evident  that  there  must  have  been,  in 
general  a  decrease.  Not  onlv  is  there  no  increase  in 
manufacturing  in  Texas,  but  under  the  system  of  rates 
in  force  there  manufacturing  is  being  centralized,  as 
it  is  impossible  to  distribute  it  without  the  adjustment 
of  rates  to  conditions.  It  is  significant  that  while  the 
Texas  commission  has  been  given  the  power  to  make 
this  adjustment,  it  is  evident  they  lack  the  ability  to 
produce  the  result  which  the  railroads  have  produced 
in  other  states.  In  the  one  matter  of  flouring  mills  is 
presented  a  very  convincing  exposition  of  the  indus- 
trial effect  of  taking  the  rate-making  power  away  from 
people  who  know  how  to  make  rates.  In  1890,  when 
the  tariffs  of  the  railroad  companies  were  in  force  in 
Texas,  there  were  690  flouring  and  grist  mills  reported 
in  the  state,  while  in  1900,  after  almost  ten  j^ears  of 
railroad  regulation,  the  only  important  industry  in  the 
>State  of  Texas  that  vitally  depended  on  the  adjust- 


35 

ment  of  freight  rates,  had  been  reduced  to  289  estab  • 
lishments.  The  number  of  mills  decreased  58  per  cent., 
while  in  the  same  time  the  production  of  cereals  in  the 
state  increased  70  per  cent.  But,  the  most  startling 
showing  is  that  in  the  face  of  a  reduction  of  58  per  cent, 
in  the  number  of  establishments  the  total  output  in- 
creased 24  per  cent.,  showing  that  the  small  mill  is 
being  driven  out,  and  the  business  concentrated  in  the 
Iiands  of  those  ^ho  happen  to  be  located  advanta- 
geousl)^  Under  the  proper  adjustment  of  freight  rates 
these  inequalities  of  location  are  overcome.  Tliis  is 
the  whole  problem  of  rate  making,  and  one  which  the 
Texas  commission  after  ten  years  of  effort,  has  shown 
itself  absolutely  unable  to  solve.  It  has  cost  58  per 
cent,  of  the  flour  mills  of  Texas  their  industrial  ex- 
istence, in  the  face  of  an  increase  of  70  per  cent,  in 
the  raw  material  and  an  increase  of  24  per  cent,  of  the 
output,  to  change  the  adjustment  of  freight  rates  from 
the  hands  of  the  railroads  who  know  how,  to  the  hands 
of  commissioners  who  do  not  know  how.  On  the  other 
hand,  in  Wisconsin,  under  the  transportation  adminis- 
tration of  the  railways,  while  the  production  of  cereals 
in  the  state  increased  but  8  per  cent.,  the  product  of 
flour  and  grist  mills  increased  54  per  cent.,  showing 
that  Wisconsin  not  only  mills  her  own  wheat,  but 
brings  it  in  to  a  large  extent  from  other  states. 
The  number  of  mills  increased  44  per  cent.,  showing 
that  the  policy  of  the  railroads  is  to  afford  distribu- 
tion of  business  rather  than  its  concentration.  In 
C)ther  words,  with  state  regulation  in  Texas  thev  have 
no  flour  mills  where  they  had  them  once,  and  with 
railroad  management  they  have  mills  in  Wisconsin 
where  they  did  not  have  them  ten  years  ago.  On  the 
other  hand,   the   government   regulation   of  rates   in 


36 

Texas,  has  concentrated  the  milling  business  in  the 
hands  of  a  few,  driven  58  per  cent,  of  the  mills  in  the 
state  out  of  the  business,  and  driven  40  per  cent,  of 
the  increased  cereal  production  out  of  the  state  to 
be  milled.  While  this  has  been  going  on  in  Texas, 
the  railroads  have  provided  tariffs  in  Wisconsin  under 
v^hich  the  milling  output  increased  26  per  cent,  more 
than  the  production  of  cereals  within  this  state,  and 
the  new  mills  established  made  an  increase  of  44  per 
cent. 

In  Texas  there  are  93  kinds  of  industries  reported 
in  the  census,  of  which  17  show  over  a  million  dollars 
investment  each.  In  Wisconsin  with  less  area  and 
less  population  there  are  155  lines  of  industry  reported 
of  which  37  show  over  a  million  dollars  investment 
each.  If  the  Texas  system  of  adjusting  rates  was  con- 
ducive to  industrial  development,  it  would  seem  that 
in  the  ten  years  it  has  been  in  operation  something 
other  than  negative  results  would  have  been  attained. 

The  analysis  of  Wisconsin  traffic  which  is  used  in 
this  connection  shows  in  detail  how  the  adjustment  of 
rates  has  worked  itself  out  in  the  course  of  vears, 
under  the  skillful  hands  of  the  traffic  experts  who  have 
had  them  in  charge.  It  would  be  much  easier  to 
say  that  this  adjustment  should  be  revised,  than  it 
would  be  to  say  how  it  shall  be  revised.  No  specific 
inequities  are  complained  of,  it  is  not  charged  that  any 
industry  of  Wisconsin  is  suffering  from  excessive 
freight  rates,  agriculture  is  thriving,  and  the  mer- 
chants of  the  state  are  prosperous.  The  more  the  traf- 
fic of  the  state  as  it  is  now  controlled  is  studied,  the 
less  there  appears  to  be  any  adequate  reason,  founded 
upon  just  cause,  for  making  any  radical  change  in 


37 

the  transportation  system  of  the  state.  In  comparing 
the  analysis  of  the  traffic  of  Wisconsin  with  Iowa, 
there  appears  to  be  still  less  reason  for  making  any 
change.  In  comparing  conditions  in  Wisconsin  with 
those  in  Texas,  there  seems  to  be  every  reason  for 
avoiding  a  change.  In  Iowa  the  same  number  of  com- 
modities are  carried  at  above  the  average  rate  that 
are  in  Wisconsin,  the  tonnage  on  them  is  1.02  per  cent, 
greater  than  in  Wisconsin,  and  the  additions  to  reve- 
nue from  them  2.21  per  cent,  less  than  Wisconsin, 
while  the  tonnage  carried  at  less  than  the  average  rate 
in  Iowa  is  1.02  per  cent,  less  than  Wisconsin  and  the 
decrease  of  revenue  therefrom  is  10.80  per  cent.  less. 
There  is  nothing  in  the  adjustment  of  the  rates  in 
either  state  as  between  each  other,  that  specially  argues 
in  favor  of  either  one.  Each  seems  to  be  well  calculated 
to  carry  to  market  the  traffic  which  each  state  pro- 
duces. But  it  should  be  remembered  that  the  bulk  of 
the  traffic  which  moves  from  Iowa  to  market  moves 
under  interstate  rates,  and  not  under  rates  fixed  by 
the  Iowa  commission.  The  leading  industrial  pro- 
duct of  Iowa  is  soft  coal,  and  the  leading  industrial 
product  of  Wisconsin  is  lumber.  Soft  coal  is  handled 
in  Wisconsin  at  4  per  cent,  higher  than  Iowa  and  lum- 
ber is  handled  in  Iowa  at  27  per  cent,  higher  than  Wis- 
consin. Certainly  Wisconsin  is  not  at  a  disadvantage 
on  her  jDrincipal  commodity.  Grain  is  an  outgoing 
product  in  both  states  and  is  handled  in  Iowa  at  12 
per  cent,  higher  than  Wisconsin.  Wherever  the  rates 
on  specific  items  are  compared,  it  will  be  found  that  the 
ruling  interests  of  the  communities  served  are  met  by 
the  rates.    What  puts  Iowa  at  a  disadvantage,  and  con- 


38 

fines  her  activities  practically  entirely  within  her  nat- 
ural limitations,  is  the  prohibition  which  the  laws  of 
that  state  place  upon  the  railroads  in  adjusting  the 
rates  other  than  within  the  fixed  degrees  of  distance. 
All  that  has  saved  Iowa  from  dire  results  is  the  ad- 
justment of  interstate  rates  into  other  states  for 
market. 

The  T.\x  of  Transportatiox  on  Commerce. 

There  has  been  more  or  less  discussion  in  the  various 
arguments  which  have  been  made  against  the  railway 
administration  of  transportation  in  Wisconsin,  of  the 
fact  that  transportation  is  a  tax  on  commerce,  and 
that  as  such  it  is  of  the  utmost  importance  that  it  be 
justly  and  equitably  levied.  All  this  argument  has 
been  indulged  in  with  no  attempt  to  prepare  a  sched- 
ule of  the  rates  upon  which  this  levy  is  made,  though 
such  a  schedule  is  a  very  easy  exhibit  to  prepare.  Per- 
haps it  has  better  served  the  purpose  of  the  opponents 
of  the  railways  to  leave  this  matter  largely  in  gener- 
ality, so  that  people  might  be  more  readily  scared 
with  the  exercise  of  the  taxing  power  by  a  private  cor- 
poration, than  they  would  be  by  the  facts  showing  how 
that  power  is  exercised. 

The  accompanying  table  shows  an  estimate  of  the 
value  of  a  carload  of  various  commodities  together 
with  the  freight  on  each  in  both  Wisconsin  and  Iowa, 
and  a  computation  of  the  tax  which  is  levied  upon 
conmaerce  in  each  state  on  each  of  the  specified  com- 
modities, in  Iowa  by  the  government,  and  in  Wiscon- 
sin by  the  railroads.     It  is  not  a  showing  which  is 


39 


The  Tax  of  Transportation  on  Commerce. 


40 


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42 

calculated  to  give  the  people  any  occasion  for  alarm 
over  the  exercise  of  the  taxing  power  by  the  trans- 
portation companies. 

This  is  intended  as  an  exposition  of  the  situation 
in  Wisconsin,  and  therefore  rates  have  been  selected 
which  will  represent  a  fair  distance  for  which  the  com- 
modity specified  is  handled,  in  actual  experience,  and 
places  from  which  the  commodity  actually  moves  have 
in  each  instance  been  taken.  So  far  as  possible  points 
have  been  selected  wholly  within  the  state  of  "Wis- 
consin, so  that  a  fair  comparison  can  be  had  with 
the  distance  tariff  of  Iowa.  In  some  commodities 
there  is  practically  no  movement  whatever  within  the 
state  of  Iowa,  and  in  those  commodities  the  compari- 
son has  been  based  on  Chicago,  which  is  their  natural 
market.  In  every  case  in  which  a  rate  wholly  within 
Wisconsin  is  used  it  is  compared  with  a  rate  wholly 
within  Iowa  except  in  the  case  of  sash  and  doors, 
where  the  natural  movement  of  the  commodity  in  Wis- 
consin is  largely  outside  the  state,  and  in  Iowa  largely 
within  the  state. 

In  the  preparation  of  this  comparison  an  effort  has 
been  made  to  compare  the  actual  conditions  of  traffic 
as  they  exist,  and  not  mere  rates  for  traffic  that  ia 
not  shipped. 

This  table  bears  out  more  in  detail  than  the  analy- 
sis of  traffic  presented  herewith,  the  actual  adjustment 
of  rates  to  conditions  which  is  afforded  by  the  Wis- 
consin system  as  opposed  to  that  of  Iowa. 

It  is  not  contended  that  there  is  any  fixed  ratio  of 
tax  which  commodities  may  bear  for  transportation, 
but  this  table  does  show  that  there  is  no  disproportion- 


43 

ate  adjiistment  of  this  tax.  There  is  no  fixed  sum  at 
which  all  commodities  will  move;  the  rate  must  be 
adjusted  to  the  nature  of  the  commodity.  And  yet, 
there  is  a  sum  below  which  the  revenue  from  the  trans- 
portation of  a  car  cannot  go.  For  these  reasons  the 
low  value  commodities  must,  in  general,  bear  a  higher 
ratio  of  transportation  tax.  Bulk  is  an  element  which 
enters  into  this  question  also.  The  amount  of  a  com- 
modity which  can  be  loaded  into  a  car  is  a  factor  in 
determining  the  value  which  can  be  transported  for  the 
unit  of  cost.  It  is  therefore  of  interest  to  note  the 
amount  which  is  the  usual  load  for  a  car,  in  connection 
with  the  iDercentage  of  freight  to  value. 

"WTieat  and  rye  are  loaded  50,000  pounds  to  the  car, 
and  in  AVisconsin  show  a  tax  of  12.5  per  cent,  for 
transportation.  Barley,  which  loads  a  tenth  less  bulk 
to  the  car  bears  a  tax  of  2  per  cent.  more.  On  the  other 
hand,  oats,  which  load  3/1 0th  less  to  the  car,  bears 
the  same  tax.  Here  the  difference  in  value  comes  in 
as  a  factor,  as  it  is  necessary  to  provide  transporta- 
tion for  the  oats  at  a  rate  that  will  make  their  move- 
ment profitable.  "While  corn  loads  50,000  pounds  to 
the  car  on  account  of  its  bulk  and  its  price  the  value 
of  the  load  is  only  two-fifths  of  that  which  can  be 
carried  in  wheat.  In  "Wisconsin  the  rate  on  this  com- 
modity amounts  to  31.2  per  cent,  of  its  value,  while 
in  Iowa  it  amounts  to  27.5  per  cent.  It  is  interesting 
to  note  in  this  connection  that  the  last  census  reports 
the  production  of  corn  in  Iowa  at  383,453,190  bushels, 
the  largest  production  of  any  state  in  the  Union,  while 
that  of  Wisconsin  only  amounted  to  53,309,810  bushels. 
It  is  probable  that  as  between  Wisconsin  and  Iowa  the 
volume  of  traffic  has  some  effect  on  the  rate.     Both 


44 

rates  here  compared  are  interstate  rates,  and  subject 
to  adjustment  to  meet  traffic  conditions.  Potatoes, 
which  carry  a  light  load  to  the  car,  and  a  small  aggra- 
gate  value,  on  account  of  their  cheapness  and  their 
bulk,  bear  a  transportation  tax  of  24  per  cent,  in  both 
states. 

When  we  come  to  live  stock,  we  find  at  once  the  effect 
of  high  value  on  the  percentage  of  freight.  All  these 
weights  are  light,  yielding  a  small  tonnage,  and  owing 
to  the  character  of  the  service,  bearing  a  relatively 
high  rate  per  hundred  weight.  But  because  of  the 
high  values  carried,  the  ratio  of  freight  to  value  is 
very  low.  There  is  no  substantial  difference  between 
the  rates  in  Iowa  and  AVisconsin.  It  will  be  noted  that 
the  percentage  for  butter  goes  up  as  the  value  trans- 
ported comes  down. 

In  coal  we  find  a  very  low  value  per  car,  coupled  with 
bulk  and  weight,  and  here  we  find  a  very  striking  il- 
lustration of  the  system  of  adjusting  rates  to  condi- 
tions. Wisconsin  has  no  coal,  and  all  that  is  used  must 
be  transported.  It  must  be  transported  cheaply  or  it 
cannot  be  profitably  used.  It  is  better  that  the  people 
of  the  state  should  pay  more  on  some  commodities  that 
will  well  stand  the  additional  tax,  and  get  their  coal 
cheaper,  than  it  is  that  on  the  one  hand  they  should 
have  each  individual  commodity  transported  at  ex- 
actly its  fair  rate.  If  the  merchandise  rates  were  cut 
squarely  in  two,  it  would  not  make  any  difference  to 
the  consumers  in  Wisconsin,  for  there  would  not  be 
enough  difference  so  that  it  could  be  computed  per  hat, 
or  per  suit  of  clothes,  or  per  lead  pencil,  or  per  paper 
of  pins.    But  if  the  rate  on  coal,  which  is  now  very  low, 


45 

were  put  where  it  would  of  itself  produce  a  revenue 
satisfactory  upou  that  item  itself,  every  consumer  of 
coal  in  Wisconsin  would  feel  the  burden,  and  many  of 
its  industries  would  sustain  severe  loss.  In  hard  coal 
it  is  to  be  expected  that  Wisconsin  would  be  at  an  ad- 
vantage, because  she  has  the  benefit  of  her  lake  ports. 
But  there  is  nothing  in  the  water  competition  that 
would  give  her  the  advantage  of  the  difference  between 
21  per  cent,  and  37.7  per  cent,  which  she  actually  en- 
joys. In  soft  coal  the  situation  is  quite  different.  Iowa 
mines  soft  coal,  and  it  is  the  leading  feature  of  the 
tonnage  of  her  railroads.  Her  coal,  it  is  true  is  of  an 
inferior  quality,  and  this  makes  the  transportation 
tax  heavier,  but  the  rate  per  car  is  higher,  by  itself. 
As  it  is,  Wisconsin  transjiorts  the  soft  coal  for  33.3 
per  cent,  of  its  value,  while  the  freight  in  Iowa  for  the 
same  distance,  under  the  Iowa  distance  tariff  is  114.7 
per  cent,  of  its  value.  This,  which  has  been  so  fre- 
quently urged  upon  the  attention  of  the  people  of  Wis- 
consin, is  the  comparison  of  a  rate  in  Iowa  made  un- 
der government  control  with  a  rate  in  Wisconsin  made 
by  the  railways  and  revised  from  time  to  time  as  the 
needs  of  commercial  conditions  demanded. 

In  sand,  gravel  and  stone,  all  low  grade  commodities 
of  bulk,  the  percentage  of  freight  to  value  is  necessar- 
ily very  high,  and  in  Iowa  very  much  higher  than  in 
Wisconsin. 

In  lumber,  bulk  weight  and  low  values  make  the  per- 
centage higher  than  is  normal,  but  in  this  again  the 
shipper  is  at  a  distinct  advantage,  wholly  within  the 
state  of  Wisconsin,  over  the  shipper  on  the  Iowa  dis- 
tance tariff  for  the  same  number  of  miles.     The  ad- 


46 

vantage  in  Wisconsin  is  almost  a  quarter  of  the  Iowa 
rate. 

The  commodities  which  are  compared  in  this  table 
constitute  the  principal  items  of  traffic  in  the 
two  states  and,  taken  together  constitute  60.02  per  cent, 
of  the  traffic  of  Wisconsin,  and  76.45  per  cent,  of  the 
traffic  of  Iowa.  Almost  without  exception  where  there 
is  any  material  advantage  shown  by  this  comparison 
in  favor  of  Iowa,  it  is  on  a  commodity  in  which  there 
is  no  traffic  in  Wisconsin,  such  as  rye,  barley,  etc., 
and  there  are  many  instances,  such  as  soft  coal,  in 
which,  if  the  railways  could  adjust  the  tariffs  on  their 
other  commodities  so  as  to  distribute  the  load  equit- 
ably, low^a  would  enjoy  the  same  advantage  as  Wis- 
consin. The  other  items  of  the  table  show  the  same 
general  condition  as  those  specifically  reviewed  here. 
There  is  no  standpoint  from  which  the  actual  results 
of  railway  regulation  in  either  Iowa  or  Texas  can  be 
made  to  afford  anv  comfort  to  the  advocate  of  similar 
action  on  the  part  of  the  people  of  Wisconsin. 

The  Earning  Capacity  of  the  Rail v/ ays  of  AVisconsin. 

It  would  seem  as  though  the  reasonableness,  and  just- 
ness and  equitableness  of  the  railway  freight  rates  of 
Wisconsin  had  been  demonstrated  as  thoroughly  as  it 
is  possible  to  make  any  matter  the  subject  of  proof, 
whether  they  are  considered  with  reference  to  their 
adjustment  as  related  to  the  different  rates  within  the 
state,  or  with  reference  to  the  much  compared  rates 
in  force  under  government  control  in  the  State  of  Iowa. 
It  would  seem  that  the  irrefutable  facts  of  commerce, 
as  they  are  disclosed  by  the  impartial  pages  of  the 


47 

Federal  census,  argue  strongly  enough  for  the  Wiscon- 
sin system  of  freight  adjustments  as  opposed  to  those, 
or  rather  the  lack  of  those  in  force  in  Iowa,  and  those 
which  are  verv  much  in  force  in  Texas.  But,  after  all 
this  there  is  yet  to  be  met  the  universal  cry  that  even 
if  equitable  and  just  in  themselves,  the  rates  as  a 
whole  are  too  high  because  the  companies  are  making 
too  much  money. 

There  seems  to  be  an  insurmountable  prejudice  to 
meet,  whenever  the  question  of  railway  finances  is  dis- 
cussed. There  is  a  well  settled  conviction  in  the  mind 
of  the  public  that  in  some  mysterious  way  the  vast 
properties  which  the  railways  own  and  operate  have 
been  conjured  out  of  the  air,  and  that  the  stocks  for 
which  people  have  paid  their  money,  and  the  bonds 
which  are  mortgages  on  those  properties,  represent 
a  vast  financial  aquarium  for  the  proper  maintenance 
of  which  the  public  is  to  be  unjustly  taxed. 

Whatever  water  there  may  ever  have  been  in  the 
railway  stocks  of  America,  and  it  would  be  useless  to 
attempt  to  deny  that  there  was  at  one  time  a  large 
amount  of  fictitious  stock  on  which  it  was  vainly  at- 
tempted to  earn  dividends,  that  water  was  all  very 
thoroughly  and  effectually  squeezed  out  in  the  drastic 
reorganization  plans  which  were  accomplished  a  few 
years  ago.  That  was  the  purpose  of  the  reorganiza- 
tions and  the  object  was  accomplished,  as  is  amply 
attested  by  the  prosperity  which  has  followed  the  re- 
adjustment of  the  securities.  But,  this  was  a  condition 
which  never  existed  in  Wisconsin,  and  which  does  not 
enter  into  the  consideration  of  the  question  in  this 
state.  The  reports  of  the  railroad  commissioner,  and 
the  action  of  the  state  tax  commission  in  making  its 


48 

assessmeDts  upon  the  railroads  of  the  state,  show  that 
the  companies  have  more  property  than  their  stocks 
and  bonds,  and  that  they  are  therefore  under-  and 
not  over-capitalized. 

For  the  past  ten  years  only  a  very  few  of  the  rail- 
roads that  do  business  in  Wisconsin  have  been  able  to 
pay  any  dividends  at  all.  The  following  list  comprises 
all  the  companies  reported  by  the  Railroad  Commis- 
sioner, and  the  number  of  those  paying  dividends  in- 
cludes all  those  who  have  declared  dividends,  whether 
they  were  declared  or  earned  in  or  for  Wisconsin,  or 
for  the  whole  line  of  interstate  roads : 


Year. 

1892 

Number 
Companies. 

30 

Number 

Paying 

Dividends 

7 

1893 

39 

6 

1894 

38 

6 

1895 

34 

5 

1896 

37 

7 

1897 

44 

5 

1898 

46 

7 

1899 

52 

7 

1900 

49 

11 

1901 

50 

11 

These  figures  do  not  indicate  the  general  prevalence 
of  undue  prosperity  among  the  railroads  of  the  state. 

The  earnings  of  the  Chicago,  Milwaukee  &  St.  Paul 
Railway  for  the  past  ten  years  show  an  increase  in  the 
per  cent,  of  net  earnings  to  stock  and  debt  gradually 
rising  from  4.87  in  1895  to  7.16  in  1904.  What  business 
enterprise  is  there  within  the  state  of  AVisconsin  that 
would  have  been  willing  to  continue  its  operations  dur- 
ing ten  years  that  showed  no  better  returns  than  these  ? 
There  is  not  a  gentleman  in  the  state  of  Wisconsin  to- 
day who  may  declaim  ever  so  loudly  against  the  robbery 


49 

of  the  people  by  the  railroads,  who  would  be  willing  to 
conduct  his  private  business  with  the  risks  attendant 
upon  railway  operation,  on  the  meager  returns  which 
the  managers  of  railway  properties  are  content  to  con- 
sider prosperous.  There  is  not  a  merchant  in  the 
state  who  would  consider  ten  per  cent,  a  fair  return  for 
the  risks  of  merchandising,  a  business  in  which  he  can 
at  least  refuse  to  sell  if  the  price  is  not  satisfactory, 
while  the  railway  must  carry  whether  the  return  is 
satisfactory  or  not. 

But,  it  is  charged  that  in  addition  to  paying  dividends 
and  interest  charges,  the  company  has  accumulated  a 
surplus,  amounting  to  about  10  per  cent,  of  its  total 
stock  and  bonds.     This  surplus,  the  accumulation  of 
the  forty  years  of  its    existence — amoimting    to    less 
than     a     quarter     of     one     per     cent,     a     year — is 
a    source    of    pride    to     the  officers     of    the    Chi- 
cago, Milwaukee  &  St.  Paul  Railway,  a  means  of  se- 
curity to  its  owners,  and  a  protection  of  its  service  to 
its  patrons.    Giving  to  the  people  dependent  upon  it 
for  transportation  service  the  best  service  of  which 
its  organization  is  capable,  giving  them  this  service  at 
rates  just,  equitable  and  constantly  lowering  as  the  vol- 
ume of  business  increases,  this  surplus,  about  which  so 
much  has  been  said,  has  been  put  as  an  anchor  to  wind- 
ward against  the  storms  that  are  sure  to  come,  and 
which  are  being  materially  hastened  by  the  unreasona- 
ble and  baseless  assaults  upon  the  management  of  the 
properties  which  are  being  made  with  renewed  vigor 
by  those  who  seek  to  make  political  capital  out  of  the 
passions  and  prejudices  of  the  people.    The  accumula- 
tion of  a  financial  surplus  by  a  railway  company  is  as 
necessary  to  its  prosperity,  if  it  can  be  accomplished 
without  imposing  undue  burdens  upon  the  patrons  of 
the  road,  as  is  the  purchase  of  a  supply  of  coal  to  meet 


50 

the  needs  of  its  engines.  It  would  be  as  wise  to  require 
the  company  to  buy  its  coal  by  the  tender  full  as  it 
would  be  to  require  it  to  get  its  money  from  hand  to 
mouth.  The  only  reason  that  a  reasonable  surplus  in 
the  railway  business  is  large,  is  because  the  business 
is  large.  A  bank  that  paid  the  same  dividends  upon  its 
stock,  and  accumulated  in  ten  years  a  surplus  of  only 
10  per  cent,  of  its  capital  would  be  out  of  business  for 
want  of  stockholders.  Why  should  the  railway  com- 
pany be  denied  in  a  limited  way  the  very  safeguards 
of  business  which  those  who  are  loudest  in  demanding 
the  restriction  of,  are  most  eager  to  enjoy  for  them- 
selves without  limit? 

The  right  of  a  railway  company  to  earn  more  than 
a  fair  dividend  in  times  of  prosperity  and  to  accumulate 
a  surplus,  was  recently  sustained  by  such  eminent  au- 
thority as  the  Hon.  Martin  A.  Knapp,  chairman  of  the 
Interstate  Commerce  Commission.    He  says : 

''Ought  not  a  railway  to  be  allowed  to  accumulate, 
in  some  form,  a  surplus  during  fat  years  which  may 
tide  over  subsequent  lean  years?  To  this  we  would 
unhestitatingly  answer  in  the  affirmative.  In  times  like 
the  present  a  railroad  company  should  be  allowed  to 
earn  something  more  than  a  merely  fair  return  upon 
the  investment." 

The  figures  for  Wisconsin  only,  do  not  show  anything 
upon  which  a  fair  judgment  can  be  predicated.  The 
data  as  to  debt  and  earnings  for  W^isconsin  only,  are 
not .  obtainable,  for  the  very  simple  reason  that  there 
is  no  such  thing  as  either  stock,  bonds  or  net  earnings 
for  Wisconsin.  The  Chicago,  Milwaukeee  &  St.  Paul 
Railway  is  a  corporate  entity,  and  not  a  commercial 
federation.  Business  done  upon  any  of  its  lines  in  any 
of  the  states  through  which  it  passes,  becomes  earn- 


51 

ings  of  the  company,  and  expenses  of  operation  and 
maintenance  in  one  state  are  a  factor  in  the  net  earn- 
ings of  business  done  in  other  states.  The  operations 
of  one  state  cannot  be  separated  from  all  the  other 
business  of  the  company,  and  identified  as  business  of 
that  state.  For  the  purposes  of  taxation,  and  for  the 
purpose  of  reports,  such  separations  have  been  arbi- 
trarily arrived  at,  sometimes  upon  a  proportional  basis, 
sometimes  upon  the  basis  of  train  revenue  miles,  and 
as  a  matter  of  fact  upon  whatever  basis  the  law  or 
the  requisition  of  the  commissioner  demanded.  These 
figures  do  not  show  the  data  of  net  earnings  accurately 
enough  to  base  any  determinations  upon  them.  The 
intermixture  of  through  and  local  business  is  so  thor- 
ough that  it  is  a  mathematical  impossibility  to  sep- 
arate them.  For  this  reason  the  rule  has  been  recog- 
nized by  the  courts  and  by  the  Interstate  Commerce 
Commission,  and  is  the  universal  rule,  and  indeed  the 
only  one  that  could  be  founded  upon  reason,  that  a  rail- 
way company  is  entitled  to  earn  a  fair  return  upon  all 
its  investment  out  of  all  its  business. 

But,  in  Wisconsin,  there  is  another  basis  upon  which 
the  charge  that  the  Chicago,  Milwaukee  &  St.  Paul 
Railway  earns  too  much  money  out  of  its  present  rates 
is  effectually  disposed  of.  The  state  itself,  by  its  tax 
commission  has  fixed  the  valuation  of  the  property  of 
the  company  within  the  state  at  $40,719  per  mile.  If 
this  is  a  fair  basis  for  taxation,  and  the  state  itself 
has  said  that  it  is,  then  is  it  not  a  fair  basis  for  earn- 
ings? If  this  is  a  fair  basis  for  earnings,  then  at  6 
per  cent,  the  company  would  be  entitled  to  earn  $2,- 
443.14  per  mile,  which  is  $277.57  more  than  it  has  aver- 
aged to  earn  for  the  last  ten  years,  and  $33.87  per  mile 


52 

more  than  it  earned  last  year,  one  of  the  most  pros- 
perous years  it  has  ever  had.  In  the  face  of  these 
facts  it  is  apparent  that  the  earnings  of  the  St.  Paul 
Company  have  not  exceeded  an  amount  which  any  well 
managed  and  prosperous  business  of  such  magnitude 
ought  to  earn. 

Gross  Eaenings  of  the  Chicago,  Milwaukee  &  St. 
Paul  Eailway  Company  in  Wisconsin. 

Much  attention  has  been  given  to  the  statements  con- 
tained in  the  executive  message  to  the  present  legisla- 
ture, purporting  to  give  the  gross  earnings  of  the  St. 
Paul  Eailway  in  Wisconsin  as  compared  with  the  other 
states  through  which  it  passes,  as  further  evidence  that 
the  rates  of  freight  in  Wisconsin  are  too  high.  It  may 
be  said  that  the  evidence  that  freight  rates  in  Wisconsin 
are  too  high  is,  so  far  as  it  has  been  presented,  all  of 
about  the  value  of  the  proof  which  these  figures  afford. 
The  gross  earnings  of  the  St.  Paul  Eailway  in  Wis- 
consin have  nothing  whatever  to  do  with  the  freight 
rates  in  Wisconsin.  Those  earnings  are  the  result 
of  the  tonnage  moved,  and  fully  half  of  it  is  tonnage 
which  passes  through  the  state,  neither  originating 
nor  terminating  within  the  state,  and  on  which  the 
freight  rates  of  the  state  have  not  the  slightest  effect 
whatever.  The  gross  earnings  are  determined  by  the 
volume  of  business  and  not  by  the  rate  of  freight.  A 
large  volume  of  business  at  a  lower  rate  of  freight 
will  produce  a  higher  gross  earning  than  a  smaller 
volume  of  business  at  a  higher  rate.  In  the  case  of 
Wisconsin,  the  volume  of  tonnage  is  swelled  by  a  large 
amount  of  traffic  from  North  and  South  Dakota,  Min- 
nesota and  Iowa  which  passes  through  the  state  on 


53 

the  way  to  Chicago,  and  by  a  large  amount  of  tonnage 
from  Chicago  to  those  states.  This  is  tonnage  which  is 
not  affected  by  Wisconsin  rates  in  the  revenue  which  it 
produces,  and,  while  the  people  of  Wisconsin  pay  no 
part  of  the  freight  charges  upon  this  large  tonnage 
amounting  to  fully  one-half  the  entire  tonnage  of 
the  state,  under  the  former  system  of  taxation  it  was 
a  source  of  constant  revenue  to  them  in  the  addition 
to  gross  earnings  which  it  presented  for  taxation  in 
Wisconsin.  On  all  of  the  business  from  all  these  states 
which  pass  over  Wisconsin  lines,  there  is  a  longer  haul 
in  Wisconsin  than  in  any  of  the  other  states,  and  there- 
fore a  larger  proportion  of  the  gross  earnings  would 
appear  in  Wisconsin  than  in  any  of  the  other  states. 
It  is  this  which  accounts  for  the  fact  that  the  gross 
earnings  in  Wisconsin  are  larger  than  in  any  of  the 
other  states.  The  gross  earnings  of  Wisconsin  are 
also  increased  in  some  measure  by  the  fact  that  the 
system  of  rates  in  force  fosters  business.  The 
combined  manufacturing  product  of  North  and 
South  Dakota,  Iowa  and  Minnesota,  is  only  25 
per  cent.  greater  than  the  manufactured  pro- 
duct of  Wisconsin  alone,  and  the  St.  Paul  road  covers 
the  whole  manufacturing  field  in  Wisconsin  more  thor- 
oughly than  it  does  in  any  other  of  the  states  in  which 
it  operates.  This  of  itself  would  make  a  very  material 
difference  in  the  gross  earnings  of  the  company  in  Wis- 
consin, for  gross  earnings  are  dependent  on  tonnage, 
and  not  rates. 

The  statement  made  in  this  connection  that  the  ap- 
portionment of  the  expenses  as  between  the  states  on 
the  train  revenue  mile  basis  is  a  method  peculiar  to 


54 

the  St.  Paul  Railway  Company  is  not  true.  This  is 
the  method  which  the  railway  commissioners  of  the 
^  various  states  require  the  companies  to  use,  under  the 
rule  adopted  by  them  in  annual  convention,  taking 
effect  July  1,  1895.  This  rule  is  complied  with  by 
all  the  interstate  roads,  so  far  as  we  have  any  knowl- 
edge. The  rule  will  be  found  in  the  proceedings  of  the 
National  Association  of  llailway  Commissioners  for 
1895,  at  page  38  of  the  report  of  those  proceedings. 
I  do  not  hesitate  to  assert  upon  the  authority  of  the 
auditing  department  of  the  St.  Paul  road,  that  the  ope- 
rating expenses  for  Wisconsin  compiled  under  this 
rule,  are  considerably  less  than  the  actual  operating 
expenses  in  the  state. 

It  should  also  be  noted  that  in  these  figures  the  ex- 
ecutive message  is  also  misleading  by  the  method  famil- 
iar to  those  who  have  followed  the  manufacture  of 
railway  statistics  in  Wisconsin,  in  that  it  includes 
revenue  from  all  sources  in  a  comparison  which  is 
applied  to  the  argument,  of  freight  rates.  The  follow- 
ing analysis  of  the  statement  discloses  its  gross  inac- 
curacy : — 


55 


Gboss  Earnings  in  Wisconsin  as  Stated  by  Gov.  La 

follette. 

Average  for  2  years  end- 
ing June  30,  1903 $14,549,459.94 

Less  Income — not  earn- 
ings      120,772.19 

$14,428,687.75 
Operating  Expenses —  on 

train  mileage  basis. . . .  $8,160,966.05 
Taxes    560,971.64      8,721,937.69 

Net  earnings  Wisconsin $5,706,750.06 

Gross  Earnings  includes : — 

Freight  Earnings   $10,360,452.32 

Passenger  Earnings  2,940,797.12 

Mail,  Express,  &  Misc 1,127,438.31 

Total  $14,428,687.75 

How  much  of  the  passenger  revenue  credited  to 
Wisconsin  as  above  is  derived  from  passengers  trans- 
ported across  the  state  cannot  be  stated  at  this  time. 
Of  the  freight  revenue  credited  to  Wisconsin  as  above, 
approximately  $5,250,000  is  derived  from  tonnage 
transported  across  the  state.  Deducting  from  this  ope- 
rating expenses  of  $3,150,000  leaves  $2,100,000  of  net 
earnings  derived  from  this  source.  Deducting  this 
amount  from  the  net  earnings  as  stated  by  Governor 
La  FoUette,  less  taxes  and  income  from  investments, 
leaves  as  net  earnings  for  Wisconsin  $3,606,750.06, 
which  still  includes  revenue  from  passengers  carried 
across  the  state — the  amount  of  which  cannot  be  as- 
certained at  this  time.  This  amount,  $3,606,750.06  is 
equal  to  5.14  per  cent,  on  the  value  of  the  property  as 
stated  by  the  tax  commission,  $70,200,000. 


56 

In  the  search  for  some  adequate  reason  for  confer- 
ring upon  a  railway  commission  the  extraordinary- 
powers  which  are  now  proposed  in  these  pending  meas- 
ures, sincere  effort  is  confronted  with  hopeless  failure. 
There  is  no  reason.  There  is  not,  and  there  never  has 
been  in  the  state  of  Wisconsin,  any  more  dissatisfac- 
tion on  the  part  of  patrons  of  the  railways  with  the 
service  afforded  them,  or  the  rates  charged,  than  is 
natural  and  inevitable  in  the  conduct  of  any  business 
as  large  as  the  transportation  business  of  Wisconsin. 

And,  whatever  laws  may  be  enacted,  the  same  dissat- 
isfaction will  exist.  It  is  largely  the  dissatisfaction 
that  is  inherent  in  human  discontent.  To  some  extent 
it  is  based  upon  sound  reasons  which  it  is  im- 
possible for  the  railways  to  remove,  and  which  it 
would  be  equally  impossible  for  the  state  to  overcome. 
The  relations  between  the  railways  and  the  people  of 
Wisconsin  have,  in  the  main,  been  cordial  and  friendly, 
and  free  from  serious  antagonisms,  ever  since  the  tem- 
porary ebulition  of  populism  passed  over  the  state,  and 
went  on  its  way  into  deserved  oblivion  thirty  years 
ago.  This  present  agitation  did  not  come  into  exist- 
ence as  the  result  of  any  popular  demand  on  the  part 
of  the  people;  it  is  the  crystallization  of  a  political 
issue,  manufactured  for  adventitious  purposes.  Great 
issues  that  spring  from  the  hearts  of  the  people  find 
the  leaders  that  such  issues  require.  Successful  poli- 
ticians find  the  issues  that  the  conditions  of  success 
demand.  It  is  significant  that  the  demand  for  railway 
regulation  in  Wisconsin  came  first  from  the  political 
stump,  and  not  from  the  field,  the  store,  or  the  factory. 
Brought  forward  as  a  political  issue  it  was  carried 
through  successive  campaigns  with  all  the  skill  and  cun- 


57 

ning  of  able  and  successful  political  generalship.  Per- 
haps never  in  tlie  history  of  any  state,  was  any  issue 
ever  presented  to  the  people  with  more  consumate 
skill  or  more  daring  cunning  than  was  the  railway 
issue  in  Wisconsin.  And  in  the  face  of  this  most  re- 
markable campaign  the  people  actually  recorded  their 
sober  judgment  against  the  agitation.  There  are  some 
features  of  the  recent  election  in  Wisconsin  which  are 
very  pertinent  to  the  consideration  of  any  legislation 
upon  this  subject.  In  the  executive  message  this  year 
your  attention  was  called  to  the  fact  that  if  any  ques- 
tion can  be  definitely  settled  by  the  people  of  a  state, 
the  question  of  railway  regulation  was  settled  by  the 
people  of  Wisconsin.  It  therefore  becomes  of  inter- 
est to  examine  just  how  the  question  was  thus  settled. 

With  no  intention  of  descending  to  personalities  it 
becomes  necessary  to  consider  the  remarkable  person- 
ality of  the  man  behind  the  issue.  It  will  not  be  de- 
nied by  his  friends  that  to  an  unusual  degree  he  has 
commanded  the  personal  enthusiasm  of  his  supporters. 
By  the  sheer  force  of  his  unique  and  versatile  genius, 
he  has  made  himself  a  personal  issue  paramount  to 
all  the  other  issues  with  which  he  has  been  identified. 
Therefore  the  vote  which  was  cast  for  him  at  the  last 
election  may  fairly  be  taken  as  not  only  the  extreme 
limit  of  the  support  of  the  people  of  the  state  for  the 
issues  he  represents,  but  it  undoubtedly  exceeds  that 
number,  by  the  many  whose  personal  allegience  to 
a  popular  leader  naturally  committed  them  to  issues 
to  which  they  would  have  been  opposed,  had  the  issues 
been  disassociated  from  the  man.  So  it  is  safe  to  say 
that  the  number  of  people  in  Wisconsin  who  are  in 
favor  of  the  regulation   of  railways   as   it  was   ad- 


58 

vocated  from  the  political  rostrum,  is  at  least  uo  larger 
than  the  vote  which  was  cast  for  Governor  La  Follette, 
and,  in  fact,  it  is  undoubtedly  less.  In  considering  the 
force  of  public  opinion  which  is  behind  this  movement 
a  most  important  fact  is  that  upwards  of  105,000  citi- 
zens of  the  state,  or  more  than  a  quarter  of  the  en- 
tire voting  population,  who  voted  for  the  head  of  the 
ticket  on  which  Governor  LaFollette  was  a  candidate, 
affirmatively  expressed  their  disapproval  of  the  issues 
to  which  he  was  committed,  by  refusing  to  vote  for  him. 
There  is  no  overwhelming  popular  clamor  for  the  is- 
sues which  105,000  citizens  of  the  state  directlv  and 
affirmatively  reject.  Nor  was  this  repudiation  of  the 
railway  issue  confined  to  those  classes  who  have  been 
referred  to  as  favored  shippers  or  coerced  employees. 
The  twenty-five  strongest  agricultural  counties  of  the 
state,  in  which  upon  the  occasion  of  his  first  election 
Governor  La  Follette  received  an  aggregate  majority 
oi  over  33,000,  gave,  last  year,  an  aggregate  majority 
of  over  a  thousand  against  him.  These  facts  show  be- 
yond question,  that  there  is  no  general  sentiment  in 
Wisconsin  which  will  sustain  the  operation  of  a  law 
not  demanded  either  by  business  considerations  or 
public  interest.  The  temper  of  the  people  of  Wiscon- 
sin, as  shown  by  their  votes,  is  not  one  in  which  any 
serious  interference  with  the  business  conditions  of 
the  state  will  be  tolerated,  merely  as  a  matter  of  politi- 
cal expediency.  It  therefore  seems  reasonably  clear 
that  any  bill  which  goes  beyond  the  convictions  on  the 
subject,  of  the  actual  minority  of  the  people  of  the 
state  who  are  conunitted  to  the  regulation  of  railways 
as  advocated  by  Governor  LaFollette,  will  utterly  fail 
of  the  popular  support  in  its  operation  without  which 


59 

its  advocates  cannot  hope  for  its  ultimate  success. 
Further  than  this,  it  must  not  be  left  out  of  considera- 
tion that  the  issue  which  was  presented  to  the  people 
of  the  state  for  their  determination  was  very  different 
in  its  nature  from  the  legislation  which  is  sought  at 
your  hands.  There  is  a  material  and  substantial  dif- 
ference between  giving  a  commission  power  to  regu- 
late rates  so  that  there  shall  be  no  injustice  in  trans- 
portation charges,  and  taking  substantially  all  the 
power  of  management  of  the  railway  proi)erties  out 
of  the  hands  of  the  companies  that  own  them,  and  vest- 
ing it  in  the  irresponsible  hands  of  a  government  com- 
mission. It  should  be  borne  in  mind  that  this  is  a  ques- 
tion which  has  not  been  "settled  by  the  people  of  the 
state",  for  it  is  an  issue  that  has  never  been  presented 
for  their  consideration. 

Certainly  the  people  of  Wisconsin  do  not  need  pro- 
tection from  excessiA'-e  freight  rates.  It  has  been  shown 
here  that  66  per  cent,  of  the  traffic  of  the  state  is  car- 
ried at  an  average  rate  lower  than  the  average  for  the 
entire  country.  It  has  been  shown  that  in  comparison 
with  the  rates  in  force  in  Iowa,  the  people  of  Wiscon- 
sin are  at  no  disadvantage.  There  is  no  complaint 
anywhere  of  excessive  freight  rates.  For  twenty-five 
years  the  average  rate  per  ton  per  mile  in  this  country 
has  steadily  declined  and  it  has  done  this  without  the 

INTERVENTION     OF     THE     fiOVEENMENT    IN    FIXING     RATES. 

The  proportion  of  the  business  of  the  country  which 
is  local  to  the  states  that  control  rates  is  not  a  large 
enough  factor  in  the  traffic  of  the  country  to  affect 
the  average  of  the  whole,  and  the  rate  for  the  whole 
average  has  declined  entirely  without  reference  to  the 
local  exercise  of  state  control.    It  is  the  natural  trend 


60 

of  the  business.  It  has  been  said  that  during  the  last 
five  years  the  average  rate  per  ton  mile  has  increased 
from  .73  of  a  cent  to  .76  of  a  cent.  That  is  true.  But, 
during  tlie  same  period,  the  increase  in  the  cost  of  ma- 
terial used,  and  consumed  in  operating  railways,  has 
advanced  about  25  per  cent.,  and  the  wages  of  railway 
employes  about  10  per  cent.  From  this  it  appears  that 
the  increase  in  the  cost  of  operating  the  railways  con- 
siderably exceeds  the  advance  shown  in  the  rate  per 
ton  mile,  and  when  it  is  considered  that  during  the 
same  period,  commodities  in  general  have  risen  about 
20  per  cent,  in  value,  it  is  seen  that  the  relative  amount 
paid  for  transportation  is  lower  now  than  it  was  five 
years  ago.  The  fact  is,  that  while  there  has  been  a 
steady  decline  in  railway  rates,  nearly  every  commod- 
ity that  is  moved  under  these  rates  has  steadily  ad- 
vanced in  value.  And,  further,  aside  from  the  steady 
decline  in  railway  rates,  the  facilities  for  moving  the 
commodities  which  have  steadily  advanced  in  value, 
have  been  greatly  improved,  at  an  enormous  expense, 
so  that  the  railways  are  giving  more  to-day  for  less 
money,  and  the  shipper  is  paying  less  for  more  and 
better  service,  than  ever  before.  And,  this  too,  so  far 
as  interstate  commerce  is  concerned,  and  so  far  as  the 
great  bulk  of  state  commerce  is  concerned,  without  the 
government  having  exercised  its  power  to  fix  rates. 
So  that  the  argument  of  advancing  rates  is  easily  dis- 
posed of.  Eates  cannot  advance;  the  current  of  the 
stream  of  commerce  is  in  the  other  direction.  There  is 
no  complaint  of  high  rates.  And  why  should  there  be? 
The  railway  rates  of  this  country  only  average  a  third 
of  those  of  Great  Britain  and  France,  and  half  those  of 
Germany,  and  very  largely  less  than  those  of  any  coun- 


61 

try  in  the  world  in  which  railways  are  operated.  Sixty- 
six  per  cent,  of  the  traffic  of  Wisconsin  is  carried  at  an 
average  rate  less  than  the  average  rate  for  the  entire 
country,  and  all  of  it  at  an  average  less  than  half  that 
of  all  other  countries. 

The  whole  complaint  of  the  people,  and  the  evil  from 
which  they  believe  they  suffer,  and  from  which  they 
seek  redress  at  your  hands,  is  discrimination  and  re- 
bates. Do  not  be  led  into  the  belief  that  when  they 
come  to  you  for  relief  from  one  thing,  they  will  be 
satisfied  with  something  entirely  different,  for  which 
they  have  not  asked  you.  The  law  as  it  stands  to-day 
affords  them  all  the  relief  which  has  been  proposed  in 
any  bill  that  has  been  presented  here.  At  the  end  of 
any  proceeding  which  may  be  instituted  under  any 
commission  which  may  be  constituted,  there  is  the  final 
determination  of  the  matter  by  the  courts,  and  to  that 
final  adjudication  either  party  to  any  controversy  is 
of  right  entitled.  Any  shipper  who  feels  that  the  rate 
that  is  charged  is  too  high,  has  the  right  to  have  the 
question  of  its  reasonableness  tried  and  determined 
in  court.  Under  any  bill  that  can  be  passed  by  your 
honorable  body  creating  any  kind  of  a  commission 
with  any  kind  of  powers,  he  still  must  submit  the  ques- 
tion to  the  determination  of  the  courts,  and  from  the 
courts  he  must  still  obtain  his  remedy.  He  has  that 
right  now  without  the  intervention  of  a  commission, 
and  at  present  he  has  the  right  to  the  determination 
of  the  question  in  his  home  court,  and  before  a  jury  of 
his  own  county.  We  all  know  from  experience  that 
there  would  be  no  misc^irriage  of  justice  in  any  litiga- 
tion that  he  might  have  with  the  railway  company  over 
the  reasonableness  of  railwav  rates  in  his  local  court. 


62 

His  rights  are  more  secure  and  can  be  more  conven- 
iently asserted  now  than  they  could  be  if  the  pending 
bill  should  pass,  requiring  him  to  litigate  all  these  is- 
sues in  Dane  County. 

Railway  rates  are  regulated  by  a  competition  that  no 
man  or  men  can  control.  That  is  the  competition  of 
business.  The  most  potent  factor  in  the  steady  and 
constant  decline  of  railway  rates  is  the  competition 
between  different  sections  of  the  country  seeking  larger 
markets  for  their  products,  and  the  competition  be- 
tween different  lines  of  business  in  different  sections 
of  the  country.  ^\T.iat  is  true  the  country  over,  is 
true  locally  to  Wisconsin.  It  is  the  constant  effort  of 
the  railways  to  broaden  the  market  of  producing  areas 
that  constantly  lowers  the  rate  per  ton  mile  in  response 
to  the  economies  of  constantly  increasing  tonnage. 
The  railway  business  is  subject  to  the  law  of  increas- 
ing returns,  under  which  the  larger  the  volume  of  busi- 
ness, the  cheaper  any  unit  of  that  business  can  be 
transacted.  It  is  because  of  this,  that  without  the  ex- 
ercise of  the  Federal  power  to  fix  rates  in  interstate 
business,  which  constitutes  the  great  bulk  of  the  traffic 
of  the  country,  and  with  only  a  very  small  percent- 
age of  the  entire  tonnage  of  the  business  in  states  lo- 
cally subject  to  rate  control,  the  average  rate  per  ton 
mile  has  decreased  since  1882  from  1.24  cents  to  .76 
of  a  cent. 

From  1873,  the  railways  of  "Wisconsin  have  been 
operated  under  a  maximum  rate  law  which  has  been 
forgotten  by  everyone,  shipper  and  carrier  alike.  The 
natural  course  of  business  has  reduced  the  rates  so  far 
below  the  maximum  permitted  by  the  Vance  law,  that 


63 

it  has  become  a  permission  of  wliich  the  railways  have 
not  been  able  to  avail  themselves,  rather  than  a  re- 
striction upon  their  charges.  In  Wisconsin  there  has 
never  been  a  general  advance  in  rates,  and  there  have 
been  many  general  reductions. 

Frankly,  gentlemen,  is  there  anything  in  this  situa- 
tion which  justifies  the  drastic  legislation  which  is 
sought?  Is  there  anything  in  the  conduct  of  the  great 
transportation  corporations  of  the  state  of  Wisconsin 
which  justifies  taking  the  rate-making  power  from  them 
and  placing  it  in  the  hands  of  a  commission.  I  think 
not.  Are  we  not  drifting  from  the  fundamentals  of 
our  government  and  building  up  a  bureaucratic  sys- 
tem of  government  by  commission,  centralizing  in  these 
appointive  bodies,  not  directly  responsible  to  the 
people,  power,  that  if  persisted  in,  is  inevitably  sub- 
versive of  popular  liberty?  In  a  recent  hearing  upon 
the  subject  of  rate  control  before  one  of  the  Congres- 
sional committees,  Mr.  Joseph  Nimmo,  Jr.,  very  aptly 
said : — 

**  During  the  last  two  thousand  years  there  has  been 
going  on  among  the  foremost  nations  of  the  globe,  a 
political  struggle  between  the  advocates  of  dispensing 
justice  in  the  conduct  of  the  inter-action  of  commercial 
industrial  forces  through  the  exercise  of  the  judicial 
power,  and  the  advocates  of  accomplishing  that  pur- 
pose through  the  exercise  of  autocratic  administrative 
authority,  the  latter  being  usually  performed  by  a 
bureau  clothed  with  autocratic  power  or  with  delegated 
legislative  authority.  The  autocratic  governmental 
method — bureaucracy — was  the  potential  cause  of  the 
downfall  of  the  Roman  Empire.  It  was  also  the  chief 
cause  of  the  French  Revolution  of  1795.  The  only 
civilized  nation  in  which  it  now  prevails  as  an  unre- 
strained expression  of  governmental  authority  is  Rus- 


64 

sia,  where  the  people  are  today  clamoring  for  its  sup- 
pression for  the  reason  that  it  constitutes  an  intoler- 
able form  of  oppression. "  ^;^ 

So  eminent  an  authority  as  Judge  Cooley,  who 
presided  over  the  Supreme  Court  of  Michigan 
for  more  than  a  quarter  of  a  century,  gave 
that  court  a  high  place  in  American  jurispru- 
dence, and  who  was  the  first  chairman  of  the 
Interstate  Commerce  Commision,  was  unalterably  op- 
posed to  granting  a  commission  power  to  fix  rates,, 
which  he  described  as  "a  dispensing  power";  a  power 
which  if  exercised,  exceeds  the  power  of  the  President 
of  the  United  States,  or  the  power  of  the  governor  of 
any  state. 

Of  the  rights  and  the  duties  of  the  state  on  this 

question  the  learned  Chief  Justice  Dixon  of  our  own 

Supreme  Court  said,,  in  1870: — 

' '  The  true  intent  and  object  of  the  power  is,  that  the 
legislature  shall  be  able  to  protect  the  rights  and  in- 
terests of  the  people,  but  not  that  it  shall  arbitrarily 
or  unnecessarily  impair  the  rights  or  franchises  of  the 
company,  or  destroy  the  property  of  its  stockholders. 
The  good  faith  of  the  state  is  pledged  against  this, 
and  it  is  not  within  the  range  of  presumption,  that  it 
will  ever  be  done.  The  individuals  owning  the  prop- 
erty, and  whom  the  corporation  represents,  purchase  it 
under  this  pledge  and  inducement  held  out  by  the 
state.  To  them  it  is  a  matter  of  mere  private  business, 
engaged  in  under  the  sanction  and  encouragement  of 
the  state,  and  for  their  individual  gain  and  emolument, 
and  the  legislature  will  no  more  unnecessarily  inter- 
fere with  it,  or  with  the  business  of  the  corporation, 
where  it  is  legitimately  conducted,  than  it  will  any 
other  private  business."  ' 

These  are  words  of  calm  deliberation.  They  are  in 
the  spirit  of  liberty  and  law. 


65 

The  place  to  enact  laws  is  in  the  legislative  chamber, 
where  deliberation  may  be  brought  to  the  guidance  of 
your  actions ;  not  in  the  heated  excitement  of  political 
campaigns,  where  the  passions  of  the  people  are  easily 
wrought  upon.  The  mandate  of  the  people,  even  if 
it  were  clearly  and  unequivocally  expressed  is  still  sub- 
ject to  the  veto  of  your  deliberate  judgment;  you  are 
here  to  legislate,  not  to  perfunctorily  record  the  opin- 
ion of  others.  It  is  so  that  our  laws  may  have  the 
stability  which  their  importance  demands,  that  their 
enactment  is  left  to  the  determination  of  deliberative 
bodies,  and  not  to  the  passing  whims  of  popular  clamor. 
The  opinions  of  the  people  are  always  entitled  to  due 
weight  at  your  hands,  but  it  is,  at  the  end,  for  you  to 
determine;  not  to  be  determined. 

When  the  State  of  Wisconsin  was  a  wilderness,  the 
railways  pushed  their  way  into  its  forests,  and  across 
its  prairies.  As  the  state  has  developed  into  one  of 
the  peerless  commonwealths  of  the  nation,  the  rail- 
way has  always  been  in  advance  of  its  development, 
an  important  factor  in  all  its  growth.  Wisconsin  and 
the  railway  have  developed  together,  until  now  her 
railway  corporations  have  spread  out  over  seven  great 
states,  and  her  commerce  has  extended  into  all  parts 
of  the  land.  Together  they  have  conquered  the  wil- 
derness, and  built  an  empire;  together  they  have 
worked  and  prospered.  In  your  hands  is  the  deter- 
mination of  much  of  the  future  prosperity  of  both. 
AVithout  railways  Wisconsin  must  suffer ;  without  Wis- 
consin the  railways  must  suffer.  Their  physical  sep- 
aration is  impossible.  Warfare  between  them  cannot 
but  be  disastrous  to  both.  Their  destinies  are  linked 
together  as  indissolubly  as  their  history;  their  past 


66 

is  the  best  guide  to  their  future.  I  ask  you,  gentle- 
men, in  all  fairness,  and  in  all  candor,  to  pause  and 
consider  well  before  a  blow  is  struck  that  will  surely 
separate  the  interests  of  the  commonwealth  and  her 
great  carriers.  Such  legislation  as  is  here  proposed 
is  war — war  which  will  of  necessity  put  the  carriers 
on  the  defensive;  war  which  is  bound  to  lead  to  end- 
less and  expensive  litigation  between  the  shippers  and 
the  railways,  who  ought  to  be  at  peace,  as  they  have 
been  for  more  than  a  quarter  of  a  century. 

In  closing,  I  beg  that  you  bear  in  mind  in  the  con- 
sideration of  these  questions,  that  the  railway  inter- 
ests like  the  business  interests  of  a  community  are  as 
a  sensitive  plant ;  it  need  not  be  struck,  but  only  touched 
to  show  where  it  is  wounded. 

I  ask  at  your  hands  nothing  but  the  fullest  protec- 
tion of  the  rights  of  every  citizen  of  the  state  and 
the  fairest  measure  of  exact  justice  for  the  railways. 


uNiVERsrrv  of  illinois-urbana 


3  0112  067592144 


